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Italian oil and gas company Eni SpA (E - Analyst Report) announced that the giant Kashagan oil field in Kazakhstan has started producing oil.

Located in the North Caspian Sea, approximately 80 kilometers southeast of Atyrau, in Kazakhstan – the Kashagan oil field – remains one of the largest finds. Since the field was discovered back in 2000, it clearly hints at the challenges faced by companies in discovering such vast resources today.

The production from the field got delayed by almost a decade. Moreover, its $41.2 billion cost makes it the most expensive oil project. Various technical problems, dispute with the Kazakh government and disagreement among oil companies were the main reasons for the delay.

Eni has a stake of 16.81% in the consortium for the development of Kashagan. The company is also accountable for development and start of production of the field through Agip Kazakhstan North Caspian Operating Company.

The consortium is represented by NCOC (North Caspian Operating Company), which operates within the North Caspian Sea Production Sharing Agreement (NCSPSA). Other partners include KazMunayGas, ExxonMobil Corporation (XOM - Analyst Report), Royal Dutch Shell plc (RDS.A), Total SA (TOT - Analyst Report), ConocoPhillips (COP - Analyst Report) and Inpex, holding 16.81%, 16.81%, 16.81%, 16.81%, 8.4% and 7.56%, respectively.

Inspite of having drilled several wells, the initial yield was just 26,000 barrels a day. Eventually, the project is expected to add around 1.5 million barrels of oil per day to the global yield. This amount will be equivalent to around 1.6% of the world’s total or roughly the amount Libya produces.

The yield is projected to grow up to 180,000 barrels per day, in the initial phase, until the spring of 2014 and gradually increase to about 370,000 barrels of oil equivalent per day by the end of 2014 and the beginning of 2015.

Considered as one of the most complex and challenging industrial projects worldwide, the oilfield is estimated to hold recoverable resources of 35 billion barrels of oil in place.

Eni carries a Zacks Rank #3 (Hold).

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