ALMATY, Kazakhstan -- After a bitter dispute that delayed the world's largest oil-field development project for more than a year, the government of Kazakhstan and the six-company consortium drilling the giant Kashagan deposit have reached an agreement in principle, according to senior Kazakh officials and Western oil executives.

"A deal is imminent," said one oilman familiar with the talks.

Both sides seemed hopelessly deadlocked only a month ago.

The field, whose ultimate development price tag is estimated at more than $20 billion, lies in the shallows of the northern Caspian Sea. If gas reinjection is successfully implemented, the field is expected to yield between 9 billion and 13 billion barrels of sweet, light crude, making it one of the world's top six deposits and the colossus of the Caspian region.

Kashagan lies at the heart of President Nursultan Nazarbayev's plan to have his sparsely populated country -- the size of Western Europe -- exporting 3 million barrels of crude per day by 2015. Such a volume is more than Russia exports today and would make Kazakhstan one of the world's top six exporters.

"Unless something goes very wrong, we should be signing within two weeks or so," said a senior executive with one of the members of the consortium exploiting the field.

The breakthrough, he and others said, came two weeks ago when top-level executives from the companies that are partners in the North Caspian Production-Sharing Agreement met in Kazakhstan with Prime Minister Daniyal Akhmetov and with Uzakbay Karabalin, the head of the state-owned oil company KazMunaiGaz.

The partners are AGIP, ExxonMobil, Total and Shell with 20.37 percent each, ConocoPhillips with 10.19 percent and Inpex of Japan with 8.33 percent.

The two Kazakh officials later went on record as saying an agreement in principle had been reached and the final details were being negotiated.

The operating company, AGIP KCO, submitted its development plan in December 2002.

But the government refused to approve the plan as submitted because it provided for the first commercial crude flowing in 2006, instead of 2005 as demanded by Nazarbayev in 2001, when AGIP was selected as the field's operator.

Because of the delay, the government insisted on imposing a fine of several hundred million dollars that the partners refused to pay. The talks dragged on for more than a year, further delaying the project.

"It's not too catastrophic," said the executive with one of the partners, noting that AGIP KCO had not entirely stopped work on the project. "Everyone is pretty satisfied at this point."

At the heart of the dispute was the interpretation of the PSA.

The partners said the delay was due to the exceptionally challenging field, which contains oil that is unusually deep and under extremely high pressure; contains high levels of poisonous hydrogen sulfide; and is located in shallow water covered in winter by a thick sheet of drifting ice.

They said the PSA provides clearly for the deadlines being subject to the consortium making "all reasonable efforts," a phrase that occurs 70 times in the English version of the agreement, according to people familiar with it.

The partners insisted they had acted in good faith and that the 2005 deadline was unrealistic from the start.

Government officials also held that if the consortium did not keep the deadlines it had agreed to, it should compensate the country for the loss of revenues.

Another major issue was a clause demanded by the partners providing a commitment from the government that similar demands for fines will not be made in the future in similar circumstances. According to sources close to the partners, that clause has been accepted by the government.

(The Moscow Times 16.ii.04)