Kazakhs Keep Probing $1.3 Billion Case Against BG, Eni Venture

May 21. Bloomberg

By Nariman Gizitdinov

Kazakhstan’s financial police are continuing to investigate an oil venture led by BG Group Plc and Eni SpA, after prosecutors closed the 187 billion tenge ($1.3 billion) fraud case that they’d begun last month.

The economic crimes agency has about two months to decide on whether to reopen the case against managers at the Karachaganak oil venture, Murat Zhumanbai, an Astana-based spokesman for the agency, said today by telephone.

Kazakhstan is cracking down on Karachaganak, its second- largest producing oil field and the only major project. The government aims to boost its share of revenue from projects run under production-sharing agreements, which allow investors to recoup costs before the state profits.

The Kazakh government won’t force its way into the Karachaganak venture as it seeks an equal stake in the biggest oil and gas project in the country that lacks state participation, Deputy Oil Minister Lyazzat Kiinov said May 19.

The agency said in April it was investigating whether top management at the Karachaganak Petroleum Operating BV venture for inflated costs from 2002 through 2007. BG Chief Executive Officer Frank Chapman said on April 29 that the company didn’t overstate the venture’s costs.

Prosecutors canceled the case on lack of evidence of a crime, Zhumanbai said.

The economic crimes agency, also known as the financial police, is also continuing a probe of “illegal earnings” of 104 billion tenge for 2008 oil output that hadn’t been approved by the state, Zhumanbai said today.