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04/02/2005:

"Kazakhstan Gets a Stake in Oil Field"

ALMATY, Kazakhstan, March 31 - Kazakhstan's national oil company said Thursday it joined a group developing an oil field in the Caspian Sea by indirectly buying half of the BG Group's stake in the project.

Terms of the deal were not disclosed. Jonathan Miller, head of communications for the BG Group, with headquarters in Reading, England, said it would sell its 16.67 percent stake in the Kashagan field for $1.8 billion to the other alliance members, which include Total of France, the Royal Dutch/Shell Group, Exxon Mobil and ConocoPhillips of the United States and the Agip unit of Eni of Italy, the operator. The group agreed to sell half the stake to the national oil company, KazMunaiGaz.

BG is fundamentally a gas company, and Kashagan is "a huge oil field" that does not fit the company's long-term strategy, Mr. Miller said.

The North Caspian P.S.A., as the project is called, is predicted to become one of the world's top fields by 2015, the biggest outside the Middle East, and to produce more than a million barrels a day.

Along with lesser fields, it is expected to propel Kazakhstan into the ranks of the world's top oil five exporters, with an expected production of more than three million barrels a day, nearly all of it to be exported.

The Kashagan project faces difficulties because the oil is laced with poisonous hydrogen sulfide that needs to be reinjected into the well at pressures never tried before. There are also management challenges.

In addition, the alliance's relations with the government of President Nursultan Nazarbayev have been so strained that the government's approval of the plan was delayed for more than a year in a fight over a fine. That pushed the target for production back two years to 2008.

The government, and much of the public, seems to think that the contract for the development of Kashagan gave an unfair advantage to the companies. BG agreed last year to sell its stake to its partners, but the Kazakh government said it had a pre-emptive right to the stake. The government's insistence on exercising that right raises questions as to whether the move will delay the development of the field, analysts said.

A spokesman for KazMunaiGaz could not be reached. The energy minister, Vladimir Shkolnik, has said that Kazakhstan, whose oil trade is dominated by Western companies, may pre-empt projects under a policy to regain control of the industry.
Full Article: nytimes.com

Kyrgyzstan, Ukraine,Georgia: this is what it's all about. Check the map. Check China.