BG-Led Kazakh Oilfield Expansion Is ‘Under Question’

Oct. 6. Bloomberg

By Nariman Gizitdinov and Eduard Gismatullin

BG-Led Kazakh Oilfield Expansion Is ‘Under Question’The BG Group Plc and Eni SpA-led planned expansion of the Karachaganak oilfield is “under question,” Lyazzat Kiinov, Kazakhstan’s deputy energy minister, said in Almaty today.

Talks are still continuing and the next phase of the development may not take off, Kiinov said. The partners are examining plans to boost production from the field, BG’s largest project in Kazakhstan.

“Discussions between the Government and partners are ongoing,” Edel McCaffrey, a spokeswoman for Reading, U.K. – based BG, said by e-mail. “The Phase III development for Karachaganak will be staged and the plans for the first stage of Phase III are currently being developed and the partners look to sanction for the first stage during 2010.”

BG last year delayed an investment decision on expanding the Karachaganak project until 2010 in anticipation of lower industry costs. Only about 6 percent of the hydrocarbons that the field is estimated to contain have been pumped. The partners had planned to expand oil-output capacity at the field by 45 percent to about 320,000 barrels of oil equivalent a day.

BG and Eni each hold 32.5 percent of Karachaganak Petroleum Operating BV. Chevron Corp. has a 20 percent stake and Russia’s OAO Lukoil owns 15 percent.

The partners and the Kazakh government are also trying to resolve a dispute over paid custom duties for crude exports last year.

The authorities are seeking to resolve the issue with the Karachaganak Petroleum Operating partners in a “friendly” manner, Finance Minister Bolat Zhamishev said Sept 22.

The sides are in talks to resolve the dispute over $1 billion in export duties “through negotiated settlement,” McCaffrey said today.