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Kazakhstan, foreign investors seal huge oil fields deal
Kazakhstan, foreign investors seal huge oil fields deal - Central Asia News Afghanistan Kazakhstan Kyrgyzstan Uzbekistan Tajikistan Turkmenistan-Sports Business and Entertainment
ALMATY—Kazakhstan has finalised a deal on the major Kashagan field in the Caspian Sea, ending uncertainty around the launch of oil production there.
On Oct. 31, the Kazakh government and members of the ENI-led Agip KCO consortium that runs the project signed a second amendment to the “Production Sharing Agreement” selling Kazakhstan’s national oil and gas giant KazMunayGas 8.33 percent of consortium members’ shares, which increases the national firm’s stake in the project to 16.81 percent.
The new deal marked the end of a dispute between Kazakhstan and foreign investors over possible delays in the launch of oil production and cost overruns.
The consortium agreed earlier that oil production should start no later than autumn 2013, and said that delays beyond that time would raise project costs from $57 billion [USD] to $136 billion. The increase in KazMunayGas’s holdings in the consortium compensated for potential budget losses were the project to be delayed further.
The new deal sets the deadline for the start of oil production at Dec. 31, 2013, and levies a “priority payment” on the consortium, which will range from 5 to 12 percent depending on the oil price.
“This means that as soon as oil is sold priority payments based on world oil prices will be immediately transferred to the Kazakhstan budget,” Energy Minister Sauat Mynbayev told journalists following the signing of the deal.
The newly set-up North Caspian Operating Company will replace Agip KCO as the operator of the project in January 2009. It will be managed by consortium members on a rotating basis, with France’s Total starting first.
ENI, ExxonMobil, Total and Shell each now hold a 16.81 percent stake in the project, ConocoPhillips holds 8.4 percent and Inpex holds 7.56 percent. Kashagan is estimated to have 38 billion barrels of oil, nine billion of which are recoverable under prevailing conditions.