Italian government fights hard for ENI on Kazakhstan

Implications: Italian oil company ENI will receive full support from Italian PM Romano Prodi and the Italian diplomacy for its negotiation with Kazakhstan for the drilling rights of Kashagan gas field.

Analysis: Big problems for Italian oil company ENI from Kazakhstan. President Nursultan Nazarbayev decided on August 27 to suspend the permits to the International consortium Agip-KCO led by ENI (together with Shell, Exxon-Mobil, Conoco, Total, Inpex and with the Kazakhstan government's oil company KazMunaiGaz with 10%) for the drilling works on the Kashagan gas filed, one of the largest in the world.

The tensions between the Kazakh government and ENI started when the Italian company announced that the start of the upstream activity will be postponed 18 months, from late 2008 to mid 2010. Kazakhstan oil minister has started off-the-records negotiation talks with ENI in the last few days. The Kazakh government's goal is to increase its stake in the consortium, according to some accounts from the current 10% up to 40%.

Italian Prime Minister Romano Prodi already offered full help to ENI in order to defend the Italian company's rights. The Italian diplomacy is already working very hard on this issue. ENI chief executive Paolo Scaroni is scheduled to meet president Nazarbayev on September 4th. If no deal will be done in that meeting, it's lvery ikely that PM Prodi will schedule an official visit to Kazakhstan, probably in the week of October 8. It's possible - but not yet decided - that even Foreign minister Massimo D'Alema will visit the country before PM Prodi's trip, especially in the case ENI's negotiation talks will become very tough.