17-04-01 Kazakhstan's Prime Minister Kasymzhomart Tokayev announced that his government would set up a special commission to review supply contracts signed by the group of foreign companies that is developing the Karachaganak gas and condensate field. The commission will be headed by Deputy Prime Minister Daniyal Akhmetov, Tokayev said.
He made his announcement after meeting with John Morrow, the general director of the Karachaganak Integrated Organization (KIO), at the field. The premier travelled to the Karachaganak field to meet with Morrow several weeks after Akhmetov began airing complaints about KIO's contracting practices.
According to Akhmetov, the group is violating the terms of its contract for the field as it is procuring only 21 % of all required goods and services from Kazakhstani suppliers and not 40 % as previously agreed. KIO is even importing materials such as sand and gravel that can easily be secured locally, the deputy premier claimed last month. He has also accused the group of awarding its most lucrative contracts to foreign suppliers and working with Kazakhstani enterprises in only the most menial capacities.

KIO has downplayed these charges, saying it has awarded a total of $ 529 mm worth of contracts to local companies. Nevertheless, Morrow told Tokayev that the group would work toward meeting its 40 % quota.
It was not clear whether the KIO head and the premier had discussed Akhmetov's demand, made in late March, that the group also work faster to meet a target for increasing local staff levels. KIO's has signed an agreement with the government stating that citizens of Kazakhstan will account for 40 % of the group's managers and 70 % of its skilled employees by 2008. Akhmetov said that this goal ought to fulfilled before 2008 and that KIO should be forced to draw up a program for increasing Kazakhstani involvement in the project within three months.
Morrow stated that KIO planned to invest a total of $ 1.023 bn in the Karachaganak project this year. Investments will fall to $ 964.7 mm in 2002 and to $ 446.9 mm in 2003, he said. The field in expected to yield 4.6 mm tons of gas condensate and 4.6 bn cm of natural gas in 2001, he said. Output will rise to 10.4 mm tons of condensate and 14.6 bn cm of gas in 2002, he added.

Karachaganak is being developed by an alliance of British Gas and Italy's Agip, which each hold a 32.5 % equity stake in the project; Texaco of the United States, with 20 %; and Russia's LUKoil, with 15 %. BG and Agip have been in on the project from the beginning, but Texaco, which bought its stake in mid-1997, is a relative newcomer. LUKoil's 15 % stake was originally reserved for Gazprom, but the Russian gas monopoly bowed out of the project in mid-1996. The partners finalized their 40-year production-sharing agreement for the 500-sq km concession with the government of Kazakhstan in 1997.
Karachaganak is one of the largest hydrocarbon deposits in Kazakhstan. The proven reserves of the field, which was discovered in 1979 and brought into production in 1984, amount to 1.2 bn tons of crude oil and gas condensate and 1.35 bn cm of natural gas.