FINANCIAL TIMES: Deal is reached over disputed stake in project: “A consortium of companies led by Italy’s Eni and consisting of ExxonMobil, Royal Dutch/Shell, ConocoPhillips and Total - all stakeholders in Kashagan - had agreed to buy BG Group’s 16.7 per cent share for $1.23bn.” (ShellNews.net) 29 Jan05
By James Boxell in London and Doug Cameron in Houston
Published: January 28 2005
The stand-off between several of the world’s biggest oil companies and the Kazakhstan government moved closer to resolution on Friday after the country’s energy minister said he had reached agreement to buy a disputed stake in the $30bn Kashagan oil field development.
A consortium of companies led by Italy’s Eni and consisting of ExxonMobil, Royal Dutch/Shell, ConocoPhillips and Total - all stakeholders in Kashagan - had agreed to buy BG Group’s 16.7 per cent share for $1.23bn. But the sale was held up after the Kazakhstan government said it had the right to pre-empt the deal and buy the stake itself.
Some of the Kashagan consortium members, including Exxon, had raised concerns about the government move but they are now understood to be more supportive. Vladimir Shkolnik, the Kazakh energy minister, said yesterday: “They [the consortium] have finally agreed with us and gave their consent. Thus, the state will buy out 50 per cent of this share.”
However, people close to the deal said details would not be agreed or finalised until after talks between the government and consortium members in Kazakhstan on Wednesday. One person close to the talks said BG Group would probably sell its entire stake to the consortium, with the consortium members then selling a half share on to the Kazakh government for about $600m.
But two other consortium members warned it was not yet clear how a transaction would be structured and that the sale of the half share was not the only option.
BG has been trying to offload its stake for almost two years but has been beset by delays as its original plan to sell to CNOOC and Sinopec, two Chinese oil companies, was blocked by the consortium partners. BG is understood to have insisted its original sales agreement with the consortium members should be honoured.
Kashagan is the world’s biggest oil discovery in recent years and is expected to reach peak production of 1.2m barrels of oil per day. Kazakhstan has sought to strengthen deal terms with international oil companies because of concerns that contracts signed in the 1990s were too generous.
Kashagan has recoverable reserves of up to 13bn barrels of oil. The Kazakh government is eager to take a stake in Kashagan because it wants to see greater state involvement in the country’s oil bonanza, particularly in the light of recent record crude prices.