UPDATE 5-Kazakhs win better terms on Kashagan, talks go on

(Writes through, adds analyst comments, background)

By Raushan Nurshayeva and Dmitry Zhdannikov

ASTANA Dec 21 (Reuters) - The major oil companies overseeing the massive Kashagan oil project in Kazakhstan have conceded more profits from the field to the country, but the state wants a larger stake, industry sources said on Friday.

The new terms would decrease the value of the field to the Eni-led (ENI.MI) consortium by billions of dollars.

This is the latest move by resource-rich countries such as Kazakhstan to alter contracts as commodity prices soar.

A source close to the talks said the group also agreed to pay the central Asian state between $2 billion and $4 billion cash, depending on international oil prices, for delays in developing the field, one of the world's largest oil deposits.

The consortium, which includes Royal Dutch Shell (RDSa.L), Total (TOTF.PA), Exxon Mobil (XOM.N), ConocoPhillips (COP.N) and Japan's Inpex (1605.T), has been in talks with Kazakhstan for months after the state complained of delays, cost overruns and environmental infringement at Kashagan.

The consortium said it signed a new memorandum with Kazakhstan that would extend the deadline for completing negotiations into early 2008. Both sides had previously aimed to close the deal by Dec. 20.

Emboldened by sky-high oil prices, Kazakhstan has intensified pressure on the group to secure itself a larger stake in the field -- the world's biggest oil find in 30 years.

Events surrounding development of the Kashagan field have raised concerns among foreign investors that the state might be following the lead of other countries like Venezuela that have tightened their grip on resources such as oil as it surged toward $100 a barrel.

Despite their public protestations over the last several months, oil companies have been negotiating from a weakened position, according to energy analyst Fadel Gheit with Oppenheimer & Co in New York.

"The consortium really had no choice," Gheit said. "The reality on the ground is that $90 oil strengthens the hand of the host governments, and that's not going to change unless we have a very steep correction in oil prices."

Countries as varied as Nigeria, Venezuela and Canada have changed terms of previously agreed upon contracts or nationalized assets that were owned by foreign oil companies.

EXXON FLEXING

Another source close to the talks said the consortium had agreed on a new formula that would decrease how much oil the companies would receive, cutting the project's value by several billion dollars.

"But as to the equity stake, there is still a lot of opposition from Exxon, which doesn't want to cut its stake. This is why the deadline was extended," the source said.

One of the sources also said that only Exxon was opposed to reduction of stakes by the members of the group to allow state-owned KazMunaiGas (KMG) to boost its stake to 16 percent.

"On this point, Exxon and the Kazakhs still need to find an agreement. The ball is now in their court," the source said.

Exxon, which has one of the largest stakes in the project, said value was key.

"Exxon Mobil is not opposed to KMG increasing its equity and continues to work with the Republic of Kazakhstan to seek an amicable solution on the appropriate value for the equity," Exxon spokesman Gantt Walton said.

Eni, Royal Dutch Shell, Total and Exxon Mobil have 18.52 percent each in Kashagan.

ConocoPhillips holds 9.26 percent, while Inpex and Kazakh state company KazMunaiGas have 8.33 percent each.

All consortium members have agreed to keep Eni as the operator of the Kashagan project, one of the sources said.

The Caspian Sea field is at the heart of Kazakhstan's ambition to triple oil output by 2017. It is now due to start pumping oil in 2010 instead of the original 2005 target. Its total costs have soared to $136 billion from $57 billion.

Martha Brill Olcott, an expert on Central Asia with the Carnegie Endowment for International Peace in Washington, said that controlling a bigger portion of the project could act as a 'coming of age' for KazMunaiGas.

"The one thing that is really critical is making KMG one of the flagship companies for the country," Olcott said.

She said the Kazakhs "want to build investor confidence not just in KMG but in Kazakh companies."

Eni shares closed flat at 24.69 euros, underperforming the DJ Stoxx oil and gas index. Exxon's stock closed up $1.30, or 1.4 percent, at $93.43 on the New York Stock Exchange. (Reporting by Olzhas Auyezov in Almaty, Raushan Nurshayeva in Astana, Svetlana Kovalyova and Sabina Suzzi in Milan, Dmitry Zhdannikov in Moscow and Michael Erman and Matt Daily in New York; Editing by James Jukwey in London and Toni Reinhold in New York)