UPDATE 1-Kazakhstan looks to offset Kashagan output setback this year

Mon Apr 14, 2014 6:12am EDT

* Kashagan not expected to produce oil this year

* Kazakhstan plans to increase oil production by 2.5 percent this year

* Government to meet Kashagan shareholders Thursday (Adds detail, quote)

By Raushan Nurshayeva

ASTANA, April 14 (Reuters) - Kazakhstan wants to make up for a possible lack of output this year from the Kashagan oil project by increasing output at other projects by at least 1.5 million tonnes (30,000 barrels per day), the economy minister said on Monday.

He said the government would meet Kashagan stakeholders on Thursday.

Production at the offshore deposit, the world's biggest oil find in 35 years, started in September but was halted in early October after the detection of gas leaks in the $50 billion project's pipeline network.

"Additional work and negotiations with users of large subsoil reserves will be held about the possible increase of output and exports from other fields by at least 1.5 million tonnes," Kazakh Economy and Budget Planning Minister Yerbolat Dosayev said.

Last week, France's Total, a shareholder in Kashagan, said it did not expect much oil output, if any, from the oilfield this year.

It is awaiting results of further analysis to assess the costs and delays facing it and its Kashagan consortium partners which include Eni, Exxon Mobil, Royal Dutch Shell and Kazakh state-run KazMunaiGas.

The government had great expectations for Kashagan to start producing oil last year and officials had said they hoped to see it produce 22 million barrels of crude by the end of the year.

Last month, Kazakh officials imposed a $737 million fine on the consortium for ecological damage.

MEETING ON KASHAGAN

Dosayev said government officials would meet Kashagan shareholders on Thursday to discuss the project.

"On April 17, a meeting with key investors will be held by the government of the Republic of Kazakhstan to discuss the current work - what is needed to be done this year. They should offer a detailed plan on what is necessary, what is to change or not," he said.

Kashagan has presented huge engineering challenges since work began 13 years ago. Much of it is built on artificial islands to avoid damage from pack ice in a shallow sea that freezes for five months a year.

The economy of the Central Asian nation of 17 million relies heavily on oil exports. Kazakhstan holds 3 percent of the world's recoverable oil reserves and is the second largest post-Soviet oil producer after Russia.

Kazakhstan plans to boost oil production this year by 2.5 percent to 83 million tonnes (1.7 million barrels per day).

Its largest producer is Chevron-led Tengizchevroil (TCO), which pumps oil at the huge Tengiz onshore field in western Kazakhstan. (Writing by Vladimir Soldatkin, editing by Jason Bush and Jason Neely)

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