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General view of the hydrocarbons processing complex in Karachaganak, northwestern Kazakhstan. Shamil Zhumatov/Reuters
General view of the hydrocarbons processing complex in Karachaganak, northwestern Kazakhstan. Shamil Zhumatov/Reuters


Kazakhstan set to freeze major gas project, minister says Add to ...

Kazakhstan will freeze further development of its most promising gas field, Karachaganak, if it fails to resolve its dispute with foreign shareholders in the project, the Kazakh oil and gas minister said on Wednesday.

Kazakhstan, a vast Central Asian nation holding 3 per cent of the world’s recoverable oil reserves, has grown more assertive over its abundant natural resources in recent years, pushing to revise agreements signed with foreign energy majors when its budget coffers were empty following the Soviet collapse in 1991.

The government has expressed interest in exerting greater control over costs during the crucial Phase Three of Karachaganak’s development.

“Without reaching agreement, Phase Three of the project will not be set in motion. Full stop,” Kazakh Oil and Gas Minister Sauat Mynbayev told reporters. “If we fail to reach agreement, the project will be frozen.”

Mr. Mynbayev said last month the government hoped to settle the dispute with the consortium within the first half of this year.

Kazakh state oil and gas company KazMunaiGas last year announced its ambition to acquire a stake in the Karachaganak Petroleum Operating Group (KPO), in which Britain’s BG Group and Italy’s ENI each own 32.5 per cent.

ENI chief executive officer Paolo Scaroni, who met President Nursultan Nazarbayev on Wednesday during a meeting of foreign investors in Kazakhstan, highlighted his company’s participation in the project from its beginnings.

“It has grown very well. We expect further development of the deposit in order to increase production of gas,” Mr. Scaroni was quoted as saying in a Russian-language statement on the presidential website, www.akorda.kz.

Mr. Scaroni said last August ENI was holding talks on cutting its shareholding in the KPO consortium in a move likely to clear the way for KazMunaiGas to acquire a stake. U.S. energy major Chevron Corp. has a 20-per-cent stake in KPO and Russia’s Lukoil owns 15 per cent.

Lukoil CEO Vagit Alekperov said on Tuesday a solution to the shareholder dispute could take anything from six months to 10 years.

KPO, which is due to operate the project until 2038, has said hydrocarbon output at Karachaganak fell to 133.7 million barrels of oil equivalent in 2010 from 139.4 million barrels in 2009.

The Kazakh government has on several occasions charged the consortium with violating tax and ecological laws and with overstating costs. KPO has consistently denied any wrongdoing.

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