The cost of developing Kazakhstan's huge Kashagan oilfield will be cut by at least $1 billion as the global crisis drives down machinery prices, Kazakh Energy Minister Sauat Mynbayev said today.

The oilfield, in the north-east of the Caspian Sea, is due to come onstream in 2012. Kazakhstan's government had earlier estimated its total cost at $136 billion.

"The (Kashagan) managing committee has adjusted the budget ... due to the current price dynamics for equipment and other items," Mynbayev told reporters.

Mynbayev said the $1 billion cut was related to the project's $32 billion initial phase, due to last until 2012.

Kashagan is run by Eni, Royal Dutch Shell, Exxon Mobil, Total, ConocoPhillips, Kazakh state oil company KazMunaiGas and Japan's Inpex Holdings.

KazMunaiGas and the foreign companies said earlier this week the global economic crisis could drive down the project costs, reported Reuters.