Italy PM heads to Kazakhstan as oil row simmers

Italy's Prime Minister heads to Kazakhstan on Sunday with oil company Eni's talks with Kazakh authorities over the giant Kashagan field expected to top his agenda.

Premier Romano Prodi will play a neutral role in an Eni-led consortium's dispute over Kashagan, the world's biggest oil find in three decades, a government source said. He will head a business delegation on a three-day visit to the Central Asian state.

"This is a question between private parties, there is no political or governmental role. We are observers," the source said.

The centre-left leader also plans to discuss a new law that lets the Kazakh government break or alter contracts with foreign investors, the source said. The law has alarmed foreign companies after the government suspended operations at Kashagan.

Kazakhstan is seeking $10 billion in compensation over delays and rising costs at Kashagan and has threatened to strip Eni of its leading role in the consortium. Talks face an October 22 deadline. Eni, 30 per cent state owned, heads a Kashagan consortium comprising Royal Dutch Shell, France's Total, ConocoPhillips, Japan's Inpex Holdings Inc and Kazakh energy company KazMunaiGas .

An oil analyst said Mr Prodi's visit could speed a Kashagan deal, but put the odds of one being announced during the trip at 50-50. "That's sort of triangulating feedback from all the partners in the project," the analyst said. "They were sort of flagging that October 22 deadline to begin with, and now they're talking down expectations. They are giving themselves some slack."