Karachaganak owners to cede 10% to state – sources

June 16. Reuters. ASTANA

* Shareholders agree to sign deal with Kazakh govt – sources
* Kazakhstan will pay for half of stake – one source
* Most claims against operators to be dropped – source
* Consortium led by ENI, BG Group

Karachaganak owners to cede 10% to state - sourcesThe consortium that owns the Karachaganak gas field in Kazakhstan has agreed to cede a 10 percent stake to the state, ending months of wrangling over its ownership, three sources close to the talks said on Thursday.

The Kazakh government will buy 5 percent at market price and secure the other 5 percent free of charge, one of the three sources said. In return, the state will drop all claims against the operators except its tax cases, the source said.

Italy’s ENI and Britain’s BG Group are the biggest shareholders in the international consortium that runs the project, with a 32.5 percent stake each. U.S. major Chevron has 20 percent and Russia’s LUKOIL 15 percent.

“They have all given their agreement for the 10 percent participation of the Republic of Kazakhstan: 5 percent free of charge and the other 5 percent at market price,” said the first source, who is familiar with the Oil and Gas Ministry’s stance.

Kazakhstan, the largest economy in Central Asia, has become more assertive over its natural resources in recent years and pushed to revise agreements struck with foreign majors when it was strapped for cash after the collapse of the Soviet Union.

The government has long expressed its desire to join the international consortium that operates the Karachaganak field in northwest Kazakhstan. State oil and gas company KazMunaiGas [KMG.UL] said a year ago that it wanted to acquire 10 percent.

Prime Minister Karim Masimov told Reuters last month that the state would complete talks on entering the project by the end of this year.

Two other sources told Reuters a settlement was imminent. Each requested anonymity because of the sensitivity of talks.

“An agreement in principle was reached a little while ago. It could be signed in the near future,” a second source said.

Karachaganak Petroleum Operating Group (KPO), the consortium that operates the field, declined to comment. In London, BG also declined to comment.

A resolution to the long-running ownership squabble should clear the way for Karachaganak to develop its lucrative third phase. Oil and Gas Minister Sauat Mynbayev warned last month that development could be frozen without a deal.

“We expect it to be signed in the near future,” the third source said. “The price of the deal has not yet been settled.”

The government, which says it wants to exercise control over costs for the phase three development of Karachaganak, has on several occasions brought cases against the operators, accusing them of overstating costs and violating tax and ecological laws.

KPO, which is due to operate the project until 2038, has consistently denied any wrongdoing.