Kazakhstan Continues Pressure on Karachaganak

March 26. Oil and Gas Industry

Kazakhstan Continues Pressure on KarachaganakAstana is strengthening its pressure on foreign participants in the consortium operating the Karachaganak oil and gas condensate field, Oil and Gas Information Agency has reported. Following the lead of the tax authorities, financial police have presented the investors claims for $708 million.

Reuters reported that the consortium was unavailable for comment on Friday. In March this year, tax authorities demanded the Karachaganak partners pay $136 million for taxes from 2004. This came after officials announced their desire to take part in the project at the end of last year. On Friday, the financial police told Reuters that they had uncovered violations in the company’s activities for 2008 and opened a criminal case.

“It was found that in executing their activities as subsoil rights holders at the Karachaganak field, production exceeded Energy and Natural Resources Ministry norms for the annual program of work in 2008 and 1.1 million tons of oil and 94,000 tons of condensate was produced”, according a letter from the financial police signed by Rustam Ibraimov, “As a result of this, illegal income of over 104 billion tenge (about $708 million) was accrued”.

Moreover, Kazakhstan’s controlling agencies headed by the General Prosecutor’s Office are reviewing to see how well the consortium adhered to legislation in its activities from February 5 to March 5, 2010 and according to the financial police, this investigation is still under way. 

In February, the state company Kazmunaygaz announced it was interested in purchasing a stake in Karachaganak.

At the beginning of 2010, the Kazakhstan authorities, who prior to the crisis had promised to not touch the tax regime for the largest oil agreement with Western companies, said they could review the conditions of the deal and perhaps remove privileges.

Britain’s BG and Italy’s Eni are operating the project; each has a share of 32.5 percent. Andother 20 percent is owned by US Chevron and 15 percent by Russia’s LUKOIL.

Karachaganak has reserves of 1.2 million tons of crude and condensate and over 1.35 trillion cubic meters of gas and is one of the biggest active oil and gas condensate fields in the world. Karachaganak produces 49 percent of Kazakhstan’s gas and 18 percent its crude.