China buys into giant Kazakhstan oilfield for $5 billion

M_Id_417398_Kashagan_offshore_oil_field

President Xi Jinping on Saturday will oversee China’s entry into Kashagan, a vast oilfield in Kazakhstan, as he tours post-Soviet Central Asia to secure hydrocarbons for the world’s largest energy consumer.

The $5 billion deal futher increases China’s rising clout in Central Asia, once Russia’s imperial backyard, and blocks an attempt by global rival India to get a stake in the oilfield, the world’s largest oil discovery in five decades.

Kazakhstan will sell 8.33 percent of the offshore oilfield to China for about $5 billion in a deal to be signed during Xi’s visit to the capital Astana later on Saturday, Kazakh government sources told.

The sale and purchase agreement will be signed by the heads of Kazakh national oil and gas company KazMunaiGas and China National Petroleum Corp (CNPC), said the officials, who requested anonymity.

“We suppose that the transaction will be closed by late September or late October,” one of the officials said.

One of the clauses of the agreement stipulates that China will help arrange a loan of up to $3 billion for KazMunaiGas to help it finance the second stage of Kashagan’s development, due to begin after 2020, he said.

China is already involved in a number of oil projects in the vast resource-rich neighbour, which is five times the size of France but has a population of just 17 million.

This week, Xi visited Kazakhstan’s neighbour Turkmenistan, which holds the world’s fourth-largest natural gas reserves, and oversaw deals aiming to boost gas supplies and build a pipeline to China.

The Kazakh deal comes after Astana decided in July to use its pre-emptive right to buy an 8.4-percent stake in Kashagan that US oil major ConocoPhillips was selling for $5 billion.

Houston-based ConocoPhillips, whittling down its worldwide portfolio of assets, announced last year it had agreed to sell the stake to ONGC, the overseas arms of the Indian state-run company.

The sale to CNPC blocks India’s plan to enter the Kashagan project.

Kazakhstan, home to 3 per cent of the world’s recoverable oil reserves, has moved in recent years to exert greater management control and secure bigger revenues from foreign-owned oil and gas projects.

KazMunaiGas entered the Kashagan consortium as a shareholder in 2005 and has since then doubled its stake to 16.81 percent.

Kashagan and the neighbouring fields in the North Caspian Sea hold estimated reserves of 35 billion barrels of oil in place, with 9 billion to 13 billion barrels being recoverable.

Kazakh officials have said they expect the giant reservoir off western Kazakhstan to produce first oil later this month.

A multinational consortium developing the field has invested some $50 billion in about 13 years, making it the costliest oil project in the world.

During Kashagan’s development, production will be gradually increased to 370,000 barrels per day in the second stage from 180,000 bpd in the first stage in 2013-14, according to North Caspian Operating Company (NCOC), which is developing the field.

Italy’s ENI, US major ExxonMobil, Royal Dutch Shell and France’s Total currently all hold 16.81 percent stakes in Kashagan. Japan’s Inpex owns 7.56 percent.

Source : The Times of India | September 7, 2013

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Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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