Kazakhstan Wants Stake in Karachaganak Field to Get More Profit

Feb. 1. Bloomberg

By Anna Shiryaevskaya and Nariman Gizitdinov

Kazakhstan Wants Stake in Karachaganak Field to Get More ProfitKazakhstan wants a stake in the BG Group Plc-led Karachaganak field to increase the country’s profit from the venture, the state oil company said.

“At the time of the financial crisis, we need projects that are cash-generating,” Kairgeldy Kabyldin, the head of the Kazakh state energy producer KazMunaiGaz National Co., said in an interview in Abu Dhabi today. The company will try to reach an agreement this year, Kabyldin said, declining to comment on the size of the stake.

The Karachaganak venture plans to spend about $14.5 billion on the expansion, called the third phase, KazMunaiGaz said last month. BG Group Plc and Eni SpA are the largest shareholders in Karachaganak Petroleum, each with a 32.5 percent stake, while Chevron Corp. has a 20 percent interest and OAO Lukoil 15 percent. The partners postponed a decision on the third phase of Karachaganak’s development last year until 2010 in anticipation of lower drilling costs.

“We will try to bring costs down, which would let us use investments in a more efficient way,” Kabyldin said today, without elaborating on what he would consider as an optimal budget for the third phase. Kabyldin said he expects a decision on the third phase this year.

BG and its partners are in talks to sell a stake in Karachaganak to the state to resolve a dispute over export duties, two people familiar with the matter told Bloomberg News in December. The government may buy a 10 percent interest in the company for about $1 billion, one of the people said.

Karachaganak Petroleum has sought to recover more than $1 billion in export duties from the state, Energy Minister Sauat Mynbayev said on Sept. 22. Kazakhstan, holder of 3.2 percent of the world’s proven reserves, imposed export duties in May 2008 as it sought a higher share of the nation’s oil wealth amid record prices.