Kazakhstan's government announced on July 2 that it will sell an 8.4% stake in Kashagan, the supergiant oilfield development project, to China National Petroleum Corporation (CNPC). CNPC has prevailed against India's Videsh, the external operations branch of Indian state-controlled Oil & Natural Gas Corporation, in the contest over this stake in Kashagan. The stake's owner, Texas-based ConocoPhillips, is selling it as part of Conoco's three-year, worldwide asset divestment program (by which Conoco has already sold its 20% stake in Russian Lukoil).
The North Caspian Operating Company (NCOC), which is developing the Kashagan field, includes Kazakhstan's KazMunaiGaz, ExxonMobil, Royal Dutch Shell, Total of France, and Italian Agip (ENI's subsidiary), each with 16.8% of the shares; ConocoPhillips with 8.4%, and the Japanese Inpex with 7.56%. Kazakhstan's government expects commercial production at Kashagan to start by September this year or shortly thereafter.
Under the consortium agreement, should any shareholder decide to sell its stake in Kashagan, the five large shareholders enjoy preemptive rights to buy that stake, subject to Kazakhstan's approval. In November 2012, Conoco announced that it would sell its stake to India's Videsh for US$5 billion. In January this year, the four major Western stakeholders in Kashagan waived their rights of preemption. Kazakhstan took five more months to deliberate on its decision.
On July 2, the Oil and Gas Ministry notified Conoco that Kazakhstan has decided to exercise its right of preemption, authorizing KazMunaiGaz to buy Conoco's stake in Kashagan for the same price of $5 billion. In a back-to-back transaction, Kazakhstan will sell Conoco's stake to China's CNPC, for a likely price of $5.4 billion. Conoco has announced that it welcomes this outcome.
The North Caspian Operating Company (NCOC), which is developing the Kashagan field, includes Kazakhstan's KazMunaiGaz, ExxonMobil, Royal Dutch Shell, Total of France, and Italian Agip (ENI's subsidiary), each with 16.8% of the shares; ConocoPhillips with 8.4%, and the Japanese Inpex with 7.56%. Kazakhstan's government expects commercial production at Kashagan to start by September this year or shortly thereafter.
Under the consortium agreement, should any shareholder decide to sell its stake in Kashagan, the five large shareholders enjoy preemptive rights to buy that stake, subject to Kazakhstan's approval. In November 2012, Conoco announced that it would sell its stake to India's Videsh for US$5 billion. In January this year, the four major Western stakeholders in Kashagan waived their rights of preemption. Kazakhstan took five more months to deliberate on its decision.
On July 2, the Oil and Gas Ministry notified Conoco that Kazakhstan has decided to exercise its right of preemption, authorizing KazMunaiGaz to buy Conoco's stake in Kashagan for the same price of $5 billion. In a back-to-back transaction, Kazakhstan will sell Conoco's stake to China's CNPC, for a likely price of $5.4 billion. Conoco has announced that it welcomes this outcome.
CNPC's entry brings synergies with the oil export pipeline to China, the onshore inception point of which in Atyrau is the closest to the offshore Kashagan field. The pipeline's capacity is being expanded, and certain Kashagan shareholders are considering using it to initiate oil sales to China.
The Indian company, had it won the contest, seemed likely to ship its share of oil from Kazakhstan via Russia. By contrast, Chinese oil companies in Kazakhstan (CNPC's subsidiaries) are using the Atyrau-Alashankou pipeline from Kazakhstan to China.
The route to China brings at least a degree of diversification to Kazakhstan's oil export options, which otherwise depend heavily on transit through Russian pipelines and ports to international markets.
Chinese companies operating through joint ventures in Kazakhstan account for 22% of Kazakhstan's oil output, according to Kazakhstan's Oil and Gas Ministry. Some Western companies operating in Kazakhstan, including Total and ENI, are said to be holding talks with China about possible oil supplies to that country from Kashagan's future production. China and Kazakhstan plan to double the capacity of the Atyrau-Alashankou pipeline, from approximately 12 million tons annually at present to 20 million tons annually (or from some 240,000 barrels per day to 400,000 bpd) by 2015. Moreover, with CNPC's entry into the Kashagan project, China's intake of oil from Kazakhstan looks certain to increase in the years ahead.
However, the Caspian Pipeline Consortium (CPC) plans to boost the capacity of its pipeline, Tengiz (Kazakhstan)-Novorossiysk (Russia), from 34 million tons annually as of 2012 to 65 million tons annually by 2016 and thereafter (or from nearly 700,000 barrels per day as of 2011 to 1.4 million bpd by 2016) . So that this pipeline will transport a
disproportionately large share of oil production from Kazakhstan.
Source Asia Times
