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Karachaganak field agreement takes effect

The Karachaganak Petroleum Operating BV (KPO) consortium and the government of Kazakhstan have completed an agreement giving the state an interest in the group and settling related disputes over giant Karachaganak natural gas and condensate field.

Under the agreement signed last Dec. 14, Kazakhstan acquires a 10% interest for $2 billion cash and $1 billion noncash consideration before tax including settlement of all cost-recovery claims. Tax of $1 billion is payable on the gain arising on the disposal, according to consortium member and cooperator BG Group.

State-owned KazMunaiGaz, which manages the government’s interest, will allocate an additional 2 million tonnes/year of capacity on the Caspian Pipeline Consortium pipeline to the project. The allocation begins at 500,000 tonnes/year and will reach the full level as the pipeline is expanded in a project expected to be completed in 3 years.

The government also agreed to exempt Karachaganak production from export custom duties until 2038, when the current production-sharing agreement expires. The agreement settles tax and custom disputes through the end of 2009.

Changes in consortium-member interests accommodating the Kazakh stake are BG Group and Eni, the other cooperator, to 29.25% from 32.5% each; Chevron, to 18% from 20%; and Lukoil, to 13.5% from 15%.

Karachaganak, estimated to hold 5 billion boe of reserves out of 9 billion bbl of condensate and 48 tcf of gas initially in place, last year produced on average 239,000 b/d of liquids and 784 MMcfd of gas.


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