UPDATE 1-Italy's Eni grows Kazakh footprint with new offshore deal

Thu Jun 12, 2014 10:30am EDT

* Deal to jointly develop offshore field in Caspian

* Positive sign for Eni after Kashagan - analyst

* Italy strategic economic partner of Kazakhstan - president (Recasts lead, adds analyst, background)

By Raushan Nurshayeva and Stephen Jewkes

BOROVOYE, Kazakhstan/MILAN, June 12 (Reuters) - Italy's Eni signed an agreement with Kazakhstan's state-owned KazMunaiGas (KMG) on Thursday to look for oil and gas in the North Caspian Sea in a move that will grow the oil major's footprint in the resource-rich country.

Eni, which has been present in Kazakhstan since 1992, is a member of the consortium developing the country's Kashagan oilfield, one of the world's biggest oil finds of recent times.

The state-controlled company originally had the job in 2001 of operating the field, but later lost its role as the sole lead operator following a series of major delays and cost overruns that irritated the Kazakh government.

Production at Kashagan, originally set for 2005, started last September but was almost immediately halted after the discovery of gas leaks in the pipeline network.

"It's a positive sign for the Italian major since despite all the friction over Kashagan the government there has given them this contract," a Milan-based analyst said.

Under the deal announced on Thursday Eni and KMG will jointly own exploration and production rights in the Isatay offshore exploration block in the Caspian Sea.

"The block is estimated to have significant potential oil resources and will be operated by a joint operating company," Eni said, without giving further details.

The deal was signed on the sidelines of a foreign investors' council held in a resort area in northern Kazakhstan by the heads of the two companies in the presence of Kazakh president Nursultan Nazarbayev and Italian prime minister Matteo Renzi.

"Eni has worked in Kazakhstan for a long time, and today it works at the largest oilfield, Kashagan. I hope the work of this company will be successful ... Italy is a strategic economic partner of Kazakhstan in Europe," Nazarbayev said.

Besides its role in Kashagan, Eni is also joint operator of the Karachaganak oil and gas project in Kazakhstan with Britain's BG Group.

The deal with KMG also envisages the development of a shipyard project on the Caspian Sea coast at Kuryk. (Additional reporting by Dmitry Solovyov; Editing by Oleg Vukmanovic and Mark Potter)

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