Energy major Royal Dutch Shell said Monday it has pulled out of a major oil and gas project in Kazakhstan's waters in the Caspian Sea due to economic factors.

Shell's decision to quit the Khazar offshore project - close to the country's flagship Kashagan field - is a blow to Kazakhstan, which relies on a few key oil fields to power its economy. KazMunayGaz state energy company said that Shell had informed Kazakhstan that it would exit the Khazar project, citing "low profitability... amid high capital costs". Shell confirmed the exit in a statement emailed to AFP, noting that "strict investment criteria" had determined the move. "The project was not competitive enough versus other opportunities in Shell's global portfolio," the energy giant said.

KazMunayGaz said the oil major had invested $900 million developing the field believed to contain 40 million tonnes of oil and 10 billion cubic metres of natural gas. The project will now be "transferred to the republic at no cost," it said.

Copyright Agence France-Presse, 2019