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China National Petroleum Co is set to acquire a stake in Kashagan, a huge oilfield in the Kazakh sector of the Caspian Sea, according to a senior executive in the Kazakh state oil company, in a deal worth $5bn.
It would represent the largest overseas acquisition by CNPC and reinforce China’s dominant position in Kazakhstan’s oil industry. Chinese groups already account for more than a quarter of the country’s oil and gas production.
Kashagan, which is due to start production in the fourth quarter of this year, is the world’s most expensive oil development project, with its first phase alone costing $40.6bn.
Daniyar Berlibayev, deputy chairman of KazMunaiGas, Kazakhstan’s state oil and gas company, said it would exercise an option to acquire an 8.4 per cent interest in the Kashagan consortium from ConocoPhillips and sell it on to CNPC.
“Why shouldn’t we choose them, from a pragmatic point of view?” he said in an interview in the Kazakh capital, Astana. “We are already linked to the Chinese: they are our partners, and they are our customers.”
Mr Berlibayev said a deal with the Chinese would allow Kazakhstan to diversify its export markets for Kashagan’s oil by providing access to the Chinese market. “We have a direct pipeline to China that does not pass through any transit countries,” he said. “We are linked to China in many ways.”
The deal would eclipse CNPC’s $4.2bn acquisition of a 20 per cent stake in a natural gas block operated by Italy’s ENI off the coast of Mozambique, which was announced in March.
But Kazakhstan’s decision to sell to the Chinese will go down badly in India. Conoco initially agreed to sell its stake in Kashagan to India’s ONGC Videsh last year for $5bn, in a deal that was hailed domestically as a coup for the state oil company.
But under Kazakh law, the state has pre-emption rights to any big strategic asset.
On Tuesday, Conoco announced it had received official notification that Kazakhstan’s oil ministry was exercising that right to pre-empt the sale to ONGC and had designated KazMunaiGas as the entity that will acquire the stake. Conoco said the sale price would remain unchanged at $5bn.
“This is another milestone in progressing our asset disposition programme,” said Don Wallette, Conoco’s head of commercial, business development and corporate planning. He said the government’s decision “demonstrates the value of this asset”.
The consortium developing Kashagan includes KMG, ENI, ExxonMobil, Royal Dutch Shell and Total SA with 16.81 per cent each, Conoco with 8.4 per cent and Japan’s Inpex with 7.56 per cent.
Discovered in 2000, Kashagan is a supergiant field with 9-13bn barrels of recoverable reserves. But it has proven to be one of the world’s most challenging energy projects: its oil, contained in a high-pressure reservoir 4,200m below the seabed, is laced with hydrogen sulphide that can kill in a matter of seconds. The northern part of the Caspian, where the field is located, is frozen for five months out of the year, and is prone to huge drifts of ice that can crush conventional oil rigs.
David Cameron, the UK prime minister, joined Kazakh president Nursultan Nazarbayev for a ceremony on Sunday to mark the start-up of Kashagan’s production facilities. Production, which is due to start later this year, will progressively ramp up to 370,000 barrels a day in the venture’s first phase.
CNPC to take $5bn stake in Kashagan oilfield - FT.com
It would represent the largest overseas acquisition by CNPC and reinforce China’s dominant position in Kazakhstan’s oil industry. Chinese groups already account for more than a quarter of the country’s oil and gas production.
Kashagan, which is due to start production in the fourth quarter of this year, is the world’s most expensive oil development project, with its first phase alone costing $40.6bn.
Daniyar Berlibayev, deputy chairman of KazMunaiGas, Kazakhstan’s state oil and gas company, said it would exercise an option to acquire an 8.4 per cent interest in the Kashagan consortium from ConocoPhillips and sell it on to CNPC.
“Why shouldn’t we choose them, from a pragmatic point of view?” he said in an interview in the Kazakh capital, Astana. “We are already linked to the Chinese: they are our partners, and they are our customers.”
Mr Berlibayev said a deal with the Chinese would allow Kazakhstan to diversify its export markets for Kashagan’s oil by providing access to the Chinese market. “We have a direct pipeline to China that does not pass through any transit countries,” he said. “We are linked to China in many ways.”
The deal would eclipse CNPC’s $4.2bn acquisition of a 20 per cent stake in a natural gas block operated by Italy’s ENI off the coast of Mozambique, which was announced in March.
But Kazakhstan’s decision to sell to the Chinese will go down badly in India. Conoco initially agreed to sell its stake in Kashagan to India’s ONGC Videsh last year for $5bn, in a deal that was hailed domestically as a coup for the state oil company.
But under Kazakh law, the state has pre-emption rights to any big strategic asset.
On Tuesday, Conoco announced it had received official notification that Kazakhstan’s oil ministry was exercising that right to pre-empt the sale to ONGC and had designated KazMunaiGas as the entity that will acquire the stake. Conoco said the sale price would remain unchanged at $5bn.
“This is another milestone in progressing our asset disposition programme,” said Don Wallette, Conoco’s head of commercial, business development and corporate planning. He said the government’s decision “demonstrates the value of this asset”.
The consortium developing Kashagan includes KMG, ENI, ExxonMobil, Royal Dutch Shell and Total SA with 16.81 per cent each, Conoco with 8.4 per cent and Japan’s Inpex with 7.56 per cent.
Discovered in 2000, Kashagan is a supergiant field with 9-13bn barrels of recoverable reserves. But it has proven to be one of the world’s most challenging energy projects: its oil, contained in a high-pressure reservoir 4,200m below the seabed, is laced with hydrogen sulphide that can kill in a matter of seconds. The northern part of the Caspian, where the field is located, is frozen for five months out of the year, and is prone to huge drifts of ice that can crush conventional oil rigs.
David Cameron, the UK prime minister, joined Kazakh president Nursultan Nazarbayev for a ceremony on Sunday to mark the start-up of Kashagan’s production facilities. Production, which is due to start later this year, will progressively ramp up to 370,000 barrels a day in the venture’s first phase.
CNPC to take $5bn stake in Kashagan oilfield - FT.com
