12-05-08 ENI, Italy's largest oil company, and partners developing the Kashagan oil field in the Caspian Sea may delay production by as much as two years, the fourth postponement at the 7 bn- to 9 bn-barrel Kazakhstan discovery.
The start of commercial output may not occur until 2012 or 2013, said Dinara Shaimardanova, an aide to Energy Minister Sauat Mynbayev, confirming his remarks earlier in the capital, Astana. ENI in January said the field, which was the world's biggest discovery in three decades, was expected to start in 2011.

ENI and partners including ExxonMobil, Royal Dutch Shell and Total were forced in January to cede stakes to Kazakhstan for delays and cost overruns at the venture. Oil companies are tapping harder-to-reach fields to compensate for dwindling production in areas such as the North Sea and Alaska.
"For sure this is not good news," said Matteo Brancolini, who owns ENI stock among the $ 1.85 bn in assets he helps manage at Meliorbanca Private SpA in Milan. "The market's already taken into account the fact that there will be delays and that the announced dates are not set in stone."

Kashagan output, which has already been delayed three times, will reach about 370,000 bpd about a year after production starts and hit a peak of about 1.5 mm bpd. The originally planned start date of 2005 was pushed back to 2008 and ENI later said production would start in 2010. Companies are seeking to bring new crude sources online as oil prices rise to records. Oil traded in New York closed near $ 126 a barrel, nearly double the average price in 2006.
"Another delay is not good news," Pio De Gregorio, head of equities at Centrobanca in Milan, said.

The Italian company is still in talks with Kazakhstan over the timing and amount of investment needed for development of the field, ENI Chief Executive Officer Paolo Scaroni said April 29. The company and partners in January yielded Kazakhstan a bigger stake in the field to make up for output delays and cost overruns.
Rising costs and extreme environmental conditions forced delays at Kashagan, ENI said. Industry-wide demand for equipment and skilled labour is pushing costs for oil projects higher by about 10 % a year, Stefano Cao, ENI's head of exploration and production, said during a conference call April 24.

The company had to change its development plan for the field in the Caspian Sea to add safety features for workers. Contractors had to build artificial islands in water from 2 meters (6 feet 6 inches) to 10 meters deep to support drilling rigs and house employees. They redesigned living quarters to stay away from wells emitting harmful hydrogen sulphide fumes.
Kashagan and other new finds face increasingly complex challenges before production can start. Petroleo Brasileiro, Brazil's state-controlled oil company, will have to deal with metal-melting heat to get at oil pools trapped below salt layers 6 miles below the ocean surface at the Tupi and Carioca fields.

Brazil's offshore Carioca oil field may hold about 10 bn barrels of recoverable reserves, Citigroup said in an April 15 report.
Petroleo Brasileiro, or Petrobras, hasn't said how much crude may be produce there. Tupi may hold about 8 bn barrels, Petrobras said.