Kazakhs won’t drop tax claim for Karachaganak stake

Oct 04. Reuters. ASTANA

* BG says expects final agreement with Kazakhstan by year-end
* Sources said earlier shareholders agreed to cede 10 pct in field

Kazakhs won't drop tax claim for Karachaganak stakeKazakhstan said it would not drop a claim for back taxes from the Karachaganak group in return for a stake in the gas field, while a member of the consortium said a deal with the government could be reached this year.

BG Group, which operates the project jointly with Italy’s ENI, said on Tuesday a deal could be expected soon.

“We are in good and cooperative negotiations with the government of Kazakhstan and we expect those to reach a conclusion before the end of this year,” Chris Finlayson, executive vice-president and managing director Europe & Central Asia, BG Group, told a news conference.

“In the meantime, we begin to plan for the future development of the field.”

Kazakhstan, the largest economy of Central Asia, has become more assertive over its natural resources in recent years and has sought to revise agreements struck with foreign energy companies when it lacked cash after the Soviet Union’s demise.

A source told Reuters last October that Kazakhstan had prepared tax claims worth $1.2 billion against KPO relating to the 2005-2008 period.

Sources told Reuters in June that the foreign owners had agreed to cede a 10 percent stake to end a protracted dispute that has delayed expansion of the field.

Kazakhstan’s government, which says it wants to exercise control over costs for the Phase Three development of Karachaganak, has brought several cases against the operators, accusing them of overstating costs and violating tax and ecological laws.

Karachaganak Petroleum Operating Group (KPO), the consortium that operates the giant field, has denied any wrongdoing.

Kazakh Oil and Gas Minister Sauat Mynbayev stressed that Kazakhstan would not drop its tax claims in return for a stake in Karachaganak.

“Taxes should never be written off, this refers to Karachaganak as well,” he told reporters on the fringes of international conference Kazenergy. “There will be no write-offs of taxes in return for a stake in Karachaganak.”

Asked whether final agreement with KPO could be reached by the end of this year, he replied: “I hope so.”

Italy’s ENI and Britain’s BG Group each have a 32.5 percent stake in KPO. U.S. major Chevron has 20 percent and Russia’s LUKOIL 15 percent.