KAZAKHSTAN - Feb. 12 - Agip To Operate Kashagan.

The Offshore Kazakhstan International Operating Co. (OKIOC) chooses Agip as operator of the $20 bn Kashagan field in the northern part of the Caspian Sea. OKIOC's decision, a major boost to the Italian company, ends months of delays which upset the government and set back development schedules. The field, one of the world's largest, is estimated to hold reserves of about 5 bn tons (35 bn barrels) in an environmentally sensitive area in shallow water that freezes during the winter. The government has sold its stake in the consortium and has had little say in the choice of an operating company. But Pres. Nursultan Nazarbayev urged shareholders in a speech on Feb. 12 not to delay further in developing the field.

"We are interested in rapid work on the contract on the Caspian Sea, and further delays will bring the cancellation of the contract", he said in remarks broadcast on TV. He called for environmental controls and asked the companies to hire Kazakh labourers on the oil derricks. OKIOC discovered oil in July 2000 in its first test well at the field. But a senior executive with the group could not say whether it would meet a government deadline of 2005 for producing oil from the site. OKIOC is now drilling its second test well on the field. Nazarbayev has said he believes that the field, in conjunction with several other huge fields, could turn Kazakhstan into a producer of 8m b/d by 2015, in line with Saudi Arabia, and wants to see the field developed as quickly as possible.

The consortium groups Phillips Petroleum Co., ExxonMobil Corp., BP Amoco, BG, Shell, TotalFinaElf, Statoil, Agip and Inpex of Japan. Statoil agreed to sell its 4.76% stake to TotalFinaElf. BP Amoco also recently agreed to sell its 9.5% stake to TotalFinaElf. The purchase of Statoil interest would make Total the biggest shareholder in the Kashagan field, with 28.6%. (Under a shareholder agreement, each partner has right of first refusal on its share of any stake that comes on the market. Further changes in the group's ownership are likely. Russia, Iran and Turkey are vying to transport oil from the republic, and the choice of export route is likely to cause further lengthy debate).