Kazakhstan: BG Completes $3 Billion Karachaganak Deal
The government of Kazakhstan has completed a deal with the Karachaganak field consortium, with state-run KazMunaiGas (KMG) to take a 10 per cent stake in the BG/Eni-operated Karachaganak field, BG Group said today.
The deal, which closed at $3 billion, brings to a close a two-year dispute between the partners in the Karachaganak field and the Kazakh government over tax issues. The agreement sees the Republic of Kazakhstan taking a 10 per cent stake in the field's Final Production Sharing Agreement (FPSA). This is completed for $2 billion cash and $1 billion non-cash consideration (pre-tax), with $1 billion to be paid back to the government in tax on gains from the disposal.
The 10 per cent stake taken by the Kazakhstan Republic, which will be managed by KazMunaiGas, ensures that the stake of the four shareholders in the project will be reduced proportionately. Eni and BG Group will both see a 32.5 per cent stake each in the project reduced to 29.25 per cent. Chevron's 20 per cent stake reduces to 18 per cent; Lukoil's 15 per cent stake reduces to 13.5 per cent.
Through the completed deal, the Karachaganak consortium will also be entitled to additional allocation in the Caspian Pipeline Consortium export pipeline over the remaining life of the FPSA. Initially, the consortium will be be entitled to an additional capacity of 0.5 million tonnes a year, with this rising to 2 million tonnes in the next 3 years as the Caspian Pipeline expands.
The agreement also means that the consortium will be exempt from export any custom duties for the Karachaganak project for the remaining 26 years of the40-year agreement.
Chief Executive of BG Group, Sir Frank Chapman, said his company looked forward to working with Kazakshtan on the project.
"We welcome the Republic of Kazakhstan and KMG into the Karachaganak contracting companies group and look forward to working with all of our partners to capture the significant remaining potential of the giant Karachaganak field."