(SRI) – Kazakhstan is yet to reach an agreement on buying into the Karachaganak oil and gas project, and new negotiations on the planned third phase of its development will be necessary once a deal is reached, Kazakhstan’s Minister of Oil and Gas Sauat Mynbayev said on Thursday.
“The negotiations are ongoing. There are no specifics,” Mynbayev said on the sidelines of the KIOGE oil and gas conference in Almaty, the Kazakhstan-Novosti news agency reported.
On Wednesday, Timur Kulibayev, head of the state-owned holding and investment company Samruk-Kazyna, said Kazakhstan was willing to pay up to $1.1 billion for a 10% stake in the Karachaganak project.
Mynbayev said the parties have not discussed the planned third phase of development of the oil and gas field, which is expected to significantly increase production. Talks will start only when an agreement is reached on Kazakhstan’s stake in the project, and an ongoing dispute over tax and environmental violations is settled.
However, Mynbayev warned that a previously proposed plan for the third phase of development was “outdated and not relevant today.”
According to reports, the two sides were not seeing eye to eye on the proposed cost of the expansion during earlier negotiations, and the Kazakh authorities urged KPO to reign in what they considered escalating costs. The consortium developing the Karachaganak field reportedly estimated the cost of the third phase of the project at $23 billion, while KazMunaiGas, the state-owned oil and gas company, said the cost could be as low as $14.5 billion.
The Karachaganak oil and gas deposit is being developed by Karachaganak Petroleum Operating (KPO), a joint venture between Eni and BG Group, both of which hold a 32.5% stake, Chevron, which owns 20%, and Lukoil, which has the remaining 15%. The 40-year Production Sharing Agreement (PSA) between the consortium and the Kazakh government to develop the Karachaganak contract area expires in 2037.