Kazakhstan may hand Kashagan stake to China

By bne IntelliNews April 17, 2013

bne -

The Kazakh government could block the sale of a stake in the giant offshore Kashagan oil and gas field to India, in order to hand it to China, an official admitted on April 16.

Speaking with journalists, Kazakh Oil and Gas Minister Sauat Mynbayev refused to rule out recent speculation that the 8.4% stake being sold by Conoco Philips could end up in the hands of either China National Petroleum Company (CNPC) or Sinopec, rather than India's Oil and Natural Gas Corporation (ONGC).

Astana is due to make a decision on whether to allow the sale of the holding in the North Caspian Operating Company (NCOC), the international consortium developing the Kashagan field, to ONGC's international arm OVL, by May 25.

However, asked if Kazakhstan might instead buy the stake itself and sell it on to one fo the Chinese groups, Mynbayev said no decision had yet been made. "Kazakhstan has not yet taken such a decision, but there is such a possibility," he said. "If the terms offered by one side are significantly better than those of the other potential buyer, then the logic for the authorities of Kazakhstan will be crystal-clear."

OVL agreed to buy Conoco Philips' Kashagan stake in November. The existing partners in the consortium - which include several international companies alongside Kazakhs state oil and gas company KazMunaiGas (KMG) - declined to exercise their pre-emptive rights. However, Astana then said it can still stop the $5bn deal under legislation allowing it to block investments into strategic sectors such as energy if they are deemed to be against the national interest.

Previously there had been speculation that Astana might block the transaction to allow KMG to up its stake in Kashagan. However, that would require both a high acquisition cost and burden the state company with the largest share of investment costs in the second phase of Kashagan's development.

China has been steadily increasing its investment in Kazakhstan over recent years. In particular, the Asian giant has piled into the oil and gas sector, as it seeks to secure steady supplies of hydrocarbons to meet growing domestic demand. Around 25% of Kazakhstan's oil output is now produced by Chinese companies.

That growing economic connection necessarily means closer political relations. President Nursultan Nazarbayev visited Beijing on April 6, meeting with Chinese President Xi Jinping and CNPC officials. An oil export deal and an agreement on principles of cooperation on expanding the Kazakhstan-China oil pipeline were signed during the trip.

Nazarbayev's press service also reports that the president discussed a potential "oil for investment" arrangement with CNPC head Zhou Jiping. Under the programme, China would gain access to Kazakh resources in return for investment into oil service and processing projects, the statement says.

A previous attempt by Chinese companies to buy into Kashagan was thwarted in 2003, when members of the NCOC consortium blocked sale of a stake by BG Group to CNOOC and Sinopec. Instead, half the stake was sold to KMG and the other half split between the existing consortium members.

New Delhi has also been actively increasing its economic ties with the Central Asian region in its own bid to secure supplies of oil, gas and other raw materials for the fast-growing Indian economy. OVL already has a 25% stake in Kazakhstan's offshore Satpaev block, and in March Indian officials proposed building a hydrocarbons pipeline from Kazakhstan to India.

Notice: Undefined index: social in /var/www/html/application/views/scripts/index/article.phtml on line 278

Related Articles

Retail trade slows in Kazakhstan amid economic uncertainty

Naubet Bisenov in Almaty - A free-floating exchange regime for Kazakhstan’s currency, the tenge, is taking its toll on retail trade as the cost of imports rise. While prices have not changed ... more

bne:Chart - Russia begins to steady the ship according to latest Despair Index

Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more

New Kazakh central bank governor re-adopts free floating regime

bne IntelliNews -   The National Bank of Kazakhstan, the central bank, has re-adopted a free-floating exchange regime under the new governor, Daniyar Akishev, who has ... more