Kazakhstan Gains 10% in BG, Eni-led Karachaganak Oil Venture

Kazakhstan agreed to acquire 10 percent of the country’s second-biggest producing oil field, operated by BG Group Plc and Eni SpA (ENI), ending a more than two- year dispute.

KazMunaiGaz National Co., the state oil and gas producer, will borrow $1 billion from the Karachaganak Petroleum Operating BV partners to buy 5 percent of the venture and get the other 5 percent in a “dispute settlement,” Oil and Gas Minister Sauat Mynbayev told reporters today in Astana.

Karachaganak was the only major oil project in which the state didn’t hold a stake as the Kazakh government increases control of the Central Asian nation’s resource wealth. Oil contributes 18 percent of gross domestic product in the former Soviet Union’s biggest producer after Russia. The four partners, which include Chevron Corp. and Russia’s OAO Lukoil, will cede stakes proportional to their ownership.

“The ministry had questions about how effective the projects were, about costs,” Mynbayev said in an interview. “Everything is settled.”

The partners will get a total “pretax consideration” of $3 billion, including cash and non-cash elements, on which it will pay $1 billion in tax, BG said in a statement.

The three-year loan from the Karachaganak partners will be repaid from KazMunaiGaz’s share of oil and gas sales, BG said. The interest will be 3 percentage points over the London interbank offered rate, Mynbayev said.

Export Increase

Tax issues were also cleared up during negotiations, Finance Minister Bolat Zhamishev said. The court claims amounted to $2.2 billion of court claims, a person who asked not to be identified before the signing said yesterday.

Karachaganak will gain the right to ship larger oil volumes through Caspian Pipeline Consortium’s link across Russia to the Novorossiysk port on the Black Sea, the Oil and Gas Ministry said in a statement. The increased quota will start from June 30, 2012, Mynbayev said.

Kazakhstan confirmed the venture’s contract and that it won’t pay customs duties. Rising output will compensate the budget for such payments, Mynbayev said. Karachaganak produced about 366,000 barrels of oil equivalent a day last year, according to the venture’s website.

Karachaganak has an estimated 9 billion barrels of condensate and 48 trillion cubic feet of gas initially in place, less than 10 percent of what has been produced, BG Group Executive Vice President Ashley Almanza said in the U.K. energy company’s statement.

As of June 30, BG and Eni will each hold 29.25 percent of the venture, Chevron will hold 18 percent and Lukoil will have 13.5 percent.

To contact the reporter on this story: Svetlana Antoncheva in Belgrade at santoncheva1@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net

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