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Kazakh Energy Minister Kanat Bozumbayev

Kazakhstan says disputes with oil majors could lead to arbitration

ASTANA, May 25, 2016

Kazakhstan's $1.6 billion dispute with oil majors developing the Karachaganak gas condensate field may escalate to arbitration if negotiations on the matter fall through, Kazakh Energy Minister Kanat Bozumbayev told Reuters on Wednesday.
 
Bozumbayev said his ministry was also preparing for "heated negotiations" on the giant Kashagan project, expected to begin commercial output between October and December and produce up to 1 million tonnes of oil this year.
 
"It is a routine dispute, (but) if we fail to reach a final agreement, there will be arbitration," Bozumbayev said in an interview, referring to Karachaganak.
 
"We want everything to be fair up until 2037 from our point of view," he said. A production-sharing agreement (PSA) on the project will expire in 2037.
 
Russia's Lukoil said last month Kazakhstan had filed a $1.6 billion claim against the PSA consortium led by BG Group and Eni. The energy ministry, in turn, has said the dispute was about calculations of the parties' shares in the field's output.
 
Eni and BG, recently acquired by Royal Dutch Shell, each own 29.25 percent of the Karachaganak project in northwest Kazakhstan, which they jointly operate. Kazakh state-owned KazMunayGaz owns 10 percent, Chevron Corp 18 per cent and Lukoil 13.5 per cent.
 
Bozumbayev said Kazakhstan had no plans to revise the Karachaganak PSA because it would hurt the investment climate.
 
"This is a perfect project, we do not need to change anything there, only to defend our position under the PSA," he said.
 
Separately, Kazakhstan and its partners are also discussing additional investments aimed at maintaining the field's production levels for a longer period.
 
"We are interested in the most efficient solution: lower investment, longer period when output is maintained at the current level," Bozumbayev said.
 
 
KASHAGAN
Another Kazakh project that has been the subject of several disputes, the giant offshore Kashagan oilfield, is set to begin commercial output this year after numerous delays and cost overruns.
 
Kashagan may produce between 50,000 and 1 million tonnes of oil this year, 3-5 million tonnes next year and 7 million tonnes in 2018, Bozumbayev said.
 
However, foreign partners in the project - Eni, ExxonMobil, Total, Shell, CNPC and Inpex - may want to delay ramping up output beyond those levels until oil prices rise.
 
"This year we are focused ... on completing the first phase (launching production) at Kashagan in line with PSA terms, and then we will immediately need to begin negotiations on what to do next," Bozumbayev said.
 
"Those are going to be heated negotiations ... The country will insist on (investors) fulfilling their commitments, the shareholders will be looking at market prices. (But) so far, this year we are being friendly."
 
Kazakhstan's official output forecast of 74 million tonnes this year is based on an oil price of $30 a barrel and does not include Kashagan, Bozumbayev said, adding that the government may revise its forecast in July.
 
TENGIZ
 
Tengiz, Kazakhstan's first big oil project, is preparing for its own expansion that will cost $36-37 billion and lift output to 36 million tonnes a year by 2021 from 27 million tonnes.
 
Bozumbayev said the government and Tengiz partners led by Chevron expected to finalise the spending plan in June.
 
He also said the government was likely to grant tax relief to OzenMunaiGas, one of the main subsidiaries of London-listed upstream company KazMunaiGas Exploration and Production. OzenMunaiGas has applied for tax relief, saying it would incur losses otherwise due to low oil prices and may need to lay off workers.
 
Bozumbayev said he had "no news" on Kazakhstan's relations with a group of OPEC and non-OPEC oil exporters who are seeking to restore balance in the global oil market and reduce oversupply by freezing output. He did not elaborate. --Reuters
 



Tags: Kazakhstan | minister | Kanat Bozumbayev |

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