BG Agreement On Karachaganak Completed With Kazakhstan

BG Group announced Thursday with the Republic of Kazakhstan and the other contracting companies in the giant Karachaganak gas-condensate field in north-west Kazakhstan, completion of their agreement which was initially signed on 14 December 2011.

Under the terms of the agreement the Republic has acquired a 10% interest in the Karachaganak Final Production Sharing Agreement (FPSA) for $2.0 billion cash and $1.0 billion non-cash consideration (pre-tax) including the final and irrevocable settlement of all cost recovery claims. Tax of $1.0 billion is payable on the gain arising on the disposal. The Republic’s interest in the Karachaganak FPSA will be managed by the national oil company, KazMunaiGas (KMG).

The consideration under the agreement also includes the allocation of an additional 2 million tonnes per year capacity in the Caspian Pipeline Consortium export pipeline (CPC) over the remaining life of the FPSA. This additional capacity starts at 0.5 million tonnes immediately and rises to 2 million tonnes during CPC expansion, which is underway and expected to complete over the next three years.

Completion of the agreement also provides for the exemption from export custom duties for the Karachaganak project until 2038, the remaining 26 years of the FPSA term; and final agreement on all tax and customs matters up to the end of 2009.

Sir Frank Chapman, BG Group Chief Executive, said, “We welcome the Republic of Kazakhstan and KMG into the Karachaganak contracting companies group and look forward to working with all of our partners to capture the significant remaining potential of the giant Karachaganak field.”

Ashley Almanza, BG Group Executive Vice President, said: “With this agreement in place the partnership can now move forward with new field development plans which are expected to unlock enormous value for both the country and the contracting companies.”

From the effective date of 28 June 2012, BG Group’s interest in the Karachaganak project has been reduced to 29.25% from the 32.5% previously held. BG Group will remain joint operator with Eni, which now also holds 29.25% (previously 32.5%). Chevron now holds 18% (20%); LUKOIL 13.5% (15%); and KMG 10%. Karachaganak is estimated to have hydrocarbons initially in place of 9 billion barrels of condensate and 48 trillion cubic feet of gas.