BG Group shifts offices to Astana as $28B gas breakthrough looms
June 20. Central Asia Newswire
By Richard Orange
BG Group will next month open new headquarters for a giant $28 billion gas project in the Kazakh capital, in a sign that a long and bitter dispute with the government may have reached a breakthrough.
The opening of the new Karachaganak Petroleum Operating Company (KPO) offices, which follows the closure of old offices of in London last month, will be accompanied by major celebrations in Astana, a source at the company said.
The move is designed to improve relations with the Kazakh authorities at a time when international oil companies are suffering a much more assertive and nationalistic economic policy.
Kazakh officials told Reuters last week that BG Group and the government were close to a deal whereby the state oil company KazMunaiGas would take 10 percent of the Karachaganak project, something the Kazakhs have been demanding for more than a year.
To add to the pressure, the authorities have loaded $2.5 billion in back taxes, “illegal earnings”, and environmental fines onto the project.
Reuters reported that KazMunaiGas would pay a market price for 5 percent of the project, and be given 5 percent in exchange for dropping some of the charges.
A deal would open the way for the third phase of the project to go ahead, potentially adding 100,000 b/d of production at a cost of some $28 billion, although the Kazakh authorities are pushing to reduce this cost as low as $14.5 billion
Karachaganak is one the world’s largest gas condensate fields, producing 360,000 barrels per day. If the field were a stand-alone company, it would make the FTSE 50, and BG Group’s 32.5 percent share represents 20 percent of its value.
The source warned that while talks were now progressing more smoothly, important aspects of the stake sale remained to be agreed, and there was no certainty of a deal being signed by the time the office opens.