KazMunaiGaz National Co., the Kazakh state energy producer, will decide in two months on acquiring a stake in the Kashagan project that ConocoPhillips (COP) intends to sell to India’s Oil & Natural Gas Corp.
“The company is considering this question but too little time has passed,” Malik Salimgereyev, a managing director at sovereign wealth fund Samruk-Kazyna, told reporters today in Kazakhstan’s capital, Astana. Samruk-Kazyna owns the national energy producer.
ConocoPhillips said last month it intends to sell its 8.4 percent of Kashagan for about $5 billion to ONGC Videsh Ltd., the overseas arm of India’s biggest energy explorer. ConocoPhillips is the largest U.S. independent oil producer by market value after spinning off refining and chemical units.
Kazakh law gives the government priority to buy any oil asset for sale on its territory. The government passed the law in 2005 before using the right to buy half of BG Group Plc (BG/)’s stake in Kashagan. The Caspian Sea field may start output in March, about eight years later than initially planned and with costs nearing about $46 billion, almost double early estimates.
KazMunaiGaz will borrow internationally to fund the acquisition if it decides to exercise its rights to the stake, Salimgereyev said.
Touted as the biggest find since the 1960s when it was discovered in 2000, the Caspian Sea field is expected to produce 370,000 barrels a day from next year. After the first phase is completed, the Kazakh government and the Kashagan partners must decide on whether to expand the project to 1 million barrels a day, a commitment that would cost tens of billions of dollars more. Drilling at the field is complicated by winter temperatures that freeze the Caspian and a highly pressurized oil reservoir that contains lethal gas.
An acquisition by KazMunaiGaz would further frustrate expansion attempts by state-controlled ONGC, which have slowed after the $2.2 billion purchase in 2009 of Imperial Energy Corp., an explorer with fields in Siberia where production started to decline quickly. The New Delhi-based producer is spending 11 trillion rupees ($198 billion) by 2030 to increase output at home and abroad.
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