Kazakhs Delay Kashagan Stake Decision to July

May 23, 2013

Kazakhstan will decide by early July whether to exercise an option to buy the ConocoPhillips 8.4 percent stake in the Kashagan oil field, which has attracted interest from companies in China and India, Reuters reports.

"(The state commission's) decision will be made by July 2," Kazakh Oil & Gas Minister Sauat Mynbayev said on Wednesday.

Kashagan, the world's biggest oilfield discovery in more than 40 years, holds an estimated 30 billion barrels of oil in place, of which 8 billion to 12 billion are potentially recoverable. First production is expected in the middle of this year.

The government has a right to buy the stake, which could sell for around $5 billion, as part of an international consortium developing the field, and if it does not, to decide on a buyer.

Kazakhstan, home to 3 percent of the world's recoverable oil reserves, has moved in recent years to exert greater management control and secure bigger revenues from foreign-owned oil and gas projects.

But Kazakh state oil and gas company KazMunaiGas already entered the Kashagan consortium in 2005 as a shareholder and has since doubled its stake to 16.81 percent.

Moscow-based UBS analyst Maxim Moshkov said there were serious doubts that the Kazakh government needed to increase its ownership.

"I don't think there are (Kazakh) ownership issues left with the project after KazMunaiGas entered it," he said.

KazMunaiGas already has a high debt level and would have limited ability to finance capital expenditure within the Kashagan project, he added.


ConocoPhillips, shedding overseas assets to cut debt and increase its investment in lower-cost domestic shale oil and gas, said it intended to sell the stake to India's state-run Oil and Natural Gas Corp for about $5 billion.

Kazakhstan originally said it had until late May to decide on the fate of the stake. Mynbayev gave no reason for the extension of the deadline.

The minister, speaking on the sidelines of the 6th Astana Economic Forum, also said Kazakhstan did not plan to change the current production-sharing agreement on Kashagan.

Last month Mynbayev said that China had shown an interest in buying the stake.

Moshkov said he believed a Chinese company was more likely to acquire the stake than an Indian firm.

"China is already in Kazakhstan, and there is infrastructure in place. There is a Chinese pipeline project," he said.

Italy's Eni, U.S. major ExxonMobil, Royal Dutch Shell and France's Total all hold 16.81 percent stakes in Kashagan. Japan's Inpex owns 7.56 percent.

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