Kazakhstan Near Agreement With BG, Eni Over Karachaganak Field

Mar 15. Bloomberg

By Halia Pavliva

Kazakhstan Near Agreement With BG, Eni Over Karachaganak FieldKazakhstan is close to resolving a dispute with BG Group Plc and Eni SpA (ENI) over Karachaganak, the nation’s second-largest producing oil field, Deputy Justice Minister Marat Beketayev said.

“As far as I am informed, we are pretty close to a settlement,” Beketayev said in an interview at Bloomberg’s headquarters in New York on March 14. “It’s going to be regarding the whole package of issues” between the government and investors, he said.

The Central Asian republic has been seeking a stake in Karachaganak to boost its share of revenue from production- sharing agreements, which allow investors to recoup costs first before the government profits. BG, the U.K.’s third-largest natural-gas producer, and its partners have faced demands for billions of dollars after being accused of inflating costs, as well as for environmental damage, back taxes and fines.

Some contracts signed with investors in Kazakhstan’s early days as an independent nation didn’t serve its interests, Beketayev said. Karachaganak is the only major Kazakh project in which the government isn’t involved.

“There was a lack of expertise on the side of the government when those contracts were signed” following the dissolution of the Soviet Union, Beketayev said. “Now, we are in a position to protect our best interests.”

Kazakhstan has so far canceled about 70 contracts with “nonperforming investors,” Beketayev said. “That is a routine process.”


The Kazakh government’s strategy is to reach a compromise without being taken to arbitration, the minister said.

“Finding a compromise is an absolutely non-discussible principle. We are trying to build a reputation as a very reliable partner,” he said.

The Karachaganak venture has held talks about ceding a minority stake to the government. BG and Eni are the largest shareholders in the venture, each with 32.5 percent, while Chevron Corp. has 20 percent and OAO Lukoil 15 percent.