Kazakhstan is considering buying ConocoPhillips's Rs 27,198 crore ($5-billion) stake in the country's biggest oilfield before selling it to a Chinese producer, sources said.
ConocoPhillips had agreed to sell its 8.4 per cent holding in the Kashagan project to India's Oil & Natural Gas Corp (ONGC). The Kazakh government is ready to exercise an option to step in and buy that stake in place of ONGC, the people said, asking not to be named before the decision is made.
Kazakhstan has sounded out the Kashagan partners about bringing one of China's state-run oil companies as a partner in the project, they said. China National Petroleum Corp or Sinopec Group, which both have investments in Central Asia's largest oil producing country, may be the eventual buyer, one of the people said.
Kazakh President Nursultan Nazarbayev met his Chinese counterpart Xi Jinping and the head of China National Petroleum on April 6, offering access to resources in exchange for investment into the Central Asian economy. China is on course to overtake the US as the world's top crude oil importer by 2014, the Organization of Petroleum Exporting Countries said on April 2.
Officials at the Chinese companies, Conoco, the Kazakh oil ministry and ONGC declined to comment.
Kashagan, a Caspian Sea field set to produce 370,000 barrels of oil a day, is set to start output by June, eight years later than initially planned and with costs nearing $46 billion, double the early estimates. The government has the right to buy any oil asset for sale on its territory at the price agreed on by the buyer and seller.
While talks on Kashagan have been going on for months, a final agreement with a Chinese buyer remains some way off, the people said.
A deal with China would give Kazakhstan greater access to the growing Chinese energy market, while financing options would open up for KazMunaiGaz National Co, the state oil producer and a Kashagan partner, they said. China's President Xi will visit Kazakhstan in the first half of the year, according to the website of the Kazakh president.
KazMunaiGaz and CNPC, China's largest oil producer, agreed during Nazarbayev's visit to expand oil pipelines from Kazakhstan to the Asian country.
Kazakhstan's oil and gas ministry declined to comment on whether the government will preempt the Conoco-ONGC deal. State-owned KazMunaiGaz National Co, a Kashagan partner, and North Caspian Operating Co, the oilfield's operator, both declined to comment, as did ConocoPhillips. ONGC didn't comment on the progress of its deal, saying on April 2 that the government has until the end of July to decide.
China pipeline
Kazakhstan produced 1.6 million barrels a day of oil in 2012, according to the U.S. Energy Information Administration, and ships crude to China through a pipeline opened in 2006. The link's capacity is being expanded to 400,000 barrels a day from 240,000 barrels a day. CNPC is already invested in Kazakhstan's oil industry as a partner in the Mangistaumunaigas venture.
ConocoPhillips, the third-largest US oil company, announced the sale of its Kashagan stake for $5 billion to ONGC in November as part of a worldwide asset disposal program. It expected the deal to close in the first half of this year, according to a statement made when the deal was announced.
Exxon Mobil Corp., Royal Dutch Shell Plc, Eni SpA, Total SA and KazMunaiGaz each hold 16.8 per cent of Kashagan, after the international partners agreed in 2008 to cut their stakes in favour of the state. Japan's Inpex Corp has 7.56 per cent.
