Karachaganak Negotiations Stumble

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

"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."

Kazakhstan has expressed interest in seeking a stake in Karachaganak and exerting greater control over costs during the crucial Phase Three of Karachaganak's development.

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

Discovered in 1979, the Karachaganak gas condensate field is estimated to contain 1.2 trillion cubic meters (42.4 trillion cubic feet) of gas and 1 billion tonnes of liquid condensate and oil.

It began production under Karachaganckgazprom, a subsidiary of Gazprom. Kazakhgas took over operatorship after the independence of Kazakhstan in 1992.

In 1992, Eni and BG Group were awarded the sole negotiating rights, forming a partnership company, Karachaganak Petroleum Operating (KPO)

BG Group and ENI are joint operators with a 32.5% stake each in KPO, with Chevron and Lukoil, who joined in 1997,  owning 20% and 15% respectively.

Kazakh state oil and gas company KazMunaiGas last year announced its ambition to acquire a stake in KPO.

ENI Chief Executive Paolo Scaroni said last August the company was holding talks on cutting its shareholding.

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

Source: Reuters, Wikipedia