BG Group and Eni, the two oil companies operating the giant Karachaganak gas condensate field in western Kazakhstan, are in talks to sell a stake in the project to the Kazakh government, Bloomberg reported on Friday.
The government may reportedly buy a 10-percent stake in Karachaganak Petroleum Operating BV (KPO) venture for $1 billion, according to sources quoted by Bloomberg. The companies involved in the project and the Kazakh government refused to comment on the possible deal.
KPO, which produces approximately 200,000 barrels of oil per day, has sought to recover more than $1 billion in export duties from the state. KPO has disputed the application of the duty, which had been introduced in May 2008, since the project operates under a Production Sharing Agreement (PSA) that shields it against adverse tax changes. The duty was annulled in January after oil prices slumped.
Talks that KPO may offer a stake to the government have been surfacing periodically, since KPO is the only major oil and gas project in Kazakhstan without the participation of the state oil company KazMunaiGas (KMG).
In the latest showdown between the government and the international oil companies operating in Kazakhstan, KMG first bought its way into and then increased its stake in the Kashagan project, the country's biggest oil deposit by reserves. Moreover, according to legislation adopted in 2005, KMG must hold at least 50 percent in all new major offshore oil production projects.
KPO said in November it planned to submit to the Kazakh government a new development plan for the third phase of the Karachaganak project by the end of the year, after it repeatedly postponed the decision, in anticipation of lower drilling costs.
According to the project's website, the Karachaganak field holds more than 1.2 billion tons of oil and condensate and more than 1.35 trillion cubic meters of gas. The partners estimate they have pumped about 6 percent of the field's total hydrocarbons.
BG and Eni are the operators of Karachaganak Petroleum, each with a 32.5 percent stake, while Chevron has a 20 percent interest and Lukoil 15 percent.