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Italy’s biggest oil and gas company – Eni SpA (E - Analyst Report) – has finally announced that it will start operations in the massive Kashagan field in Kazakhstan by March 2013.

The project encountered several delays since its discovery, owing to technical problems of extracting oil in an extreme climate and the presence of sulphide in the associated natural gas. Apart from these hurdles, rising costs have also emerged as an impediment. However, overcoming all these hurdles, Eni is set to bring the field online by March 2013.

The field, discovered in July 2000, is developed by a consortium including Eni SpA, ExxonMobil Corporation (XOM - Analyst Report), Royal Dutch Shell Plc (RDS.A - Analyst Report), French energy giant Total SA (TOT - Analyst Report), Japan's INPEX Holdings Inc and KazMunaiGas. Earlier in 2012, the consortium had agreed on a deadline of June 2013 for project commencement with the Kazakh authorities.

Currently, Eni is concentrating on ascertaining the amount of natural gas reserves in offshore Mozambique that it has access to.  As of now, Eni is not contemplating the divestment of its 70% interest, but may consider selling a portion of its equity in the near future.

Eni’s talks with Houston-based Anadarko Petroleum Corp. (APC - Analyst Report) have been encouraging so far, regarding the utilization of their offshore Mozambique observations and finds.

Eni’s operations in Africa forms a vital part of its portfolio as it proceeds to strengthen its long-term growth with plans to concentrate more on upstream operations.

Increasing competition and declining demand affected Eni’s gas and power division while its refining business was also in loss during the second quarter of 2012. Therefore, it intends to reposition and benefit from more lucrative upstream operations.

Eni retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating. We also maintain our Neutral recommendation for the company.

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