Kazakhstan wants stake in Kashagan field

Jun 29, 2004 02:00 AM

Kazakhstan's top energy official said that the government is determined to take a stake in the Kashagan oil field, signalling there may be more turmoil as investors try to develop the world's largest oil find in more than three decades.
"Does a country have a right to purchase a stake in a project that is its own?" Vladimir Shkolnik, Kazakhstan's minister of energy and mineral resources, asked. "Of course, it has the right to buy such a stake," he said. "The asset belongs to the state anyway."

At issue is nearly one-fifth of Kashagan, which lies under the Caspian Sea. The huge field will cost an estimated $ 29 bn to develop and is expected to yield a total of some 13 bn barrels of oil.
The project has been beset by delays. Although oil was originally expected to flow in 2005, the target is now 2008. BG Group, ENI, Shell, ExxonMobil, Total, ConocoPhillips and Inpex of Japan agreed to develop the field after its discovery in 2000, but BG said has since opted to sell its 16.67 % stake.

The companies already involved say they have the right to offer their stake to another company in the group, except for Inpex, before offering it to an outsider.
"The partners have a right to pre-empt, and we have a right to assign our share within the consortium," a BG spokeswoman, Petrina Fahey, said.
The Kazakhstan government disagrees. "In accordance with our legislation, pre-emptive rights belong to us," Shkolnik said. "If Kazakhstan has direct participation in such a project the project will move much faster," he added.

The government has been discussing a proposed amendment which would allow the republic to buy some below-ground rights in projects as they are being developed. The decision to buy into Kashagan may have stemmed from that discussion, oil experts say.
The concept is "not entirely out of the blue, but it has taken some people by surprise that it has come up so quickly," said Katherine Hardin, an associate director at Cambridge Energy Research Associates.

Source: International Herald Tribune
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