Expert: Chinese CNPC to resolve financial problems in Kasahgan

Azerbaijan, Baku, July 4 / Trend E. Kosolapova/

If Chinese CNPC joins the Kazakh oil and gas project Kashagan, it can help to resolve its financial problems, expert at the Kazakhstan Institute of Political Solutions Sergei Smirnov believes.

"The project has a number of problems, including financial. Moreover, the geological structure of the field is very complicated. It requires extraordinary technological mining solutions which entail high expenditures," Smirnov said.

According to the expert, a lot of money has been invested into the project, but it still needs more investments.

"As the world experiences the global financial crisis, the shareholder companies do not have much money to invest," he said.

Smirnov noted that China has also expressed interest for share in Kashagan, but foreign investors were categorically against participation of Chinese shareholder in the project. Back then, the share was purchased by Kazakh KazMunaiGas. However, this time they expressed no disagreement and gave the right to make decision on this issue to Kazakhstan.

"So, I think they are also interested in the Chinese money," the expert said.

Smirnov believes that Kazakhstan made decision in favor of CNPC because such a deal will be more financially profitable then a deal with Indian ONGC Videsh Limited which was also an aspirant for the share.

"However, in the pursuit of money, the political consequences of such a decision are not taken into consideration," he said.

According to Smirnov, China's participation in Kashagan can increase Kazakhstan's economical and even political dependence from China.

China's presence in Kazakhstan is remarkably increasing in general, he said. In particular, he reminded that Kazakh authorities had decided to launch oil tolling operation in China and as a result the dependence of Kazakhstan's fuel market is increasing. China's participation in Kashagan can increase Kazakhstan's dependence on this country in the sphere of oil production.

"Trying to get rid of dependence on energy supplies from Russia, Kazakhstan actively wants to become dependent from other countries," Smirnov said.

According to the expert, China currently has mainly an economic interest in Kazakhstan, such as raw materials, including uranium, oil, gas. But as the economical dependence of Kazakhstan is increasing, it can also become politically dependent from China, he said.

Earlier Kazakh Oil and gas Ministry said that Kazakh KazMunaiGas would buy a ConocoPhillips share in Kashagan. Moreover, KMG head Lyazzat Kiinov told earlier Reuters that the company would resell a stake to Chinese CNPC.

Kashagan is one of the largest fields discovered in the past 40 years. According to the analysts, it has the potential to unite the top five largest oil companies in the world. Kazakh geologists estimate geological oil reserves at 4.8 billion tons. According to the project operator, total oil reserves are 38 billion barrels (six billion tons), with a recoverable volume of about 10 billion barrels. Natural gas reserves are estimated at over one trillion cubic meters. Oil production start at the field is expected until the end of 2013.

At present, the Kashagan project participants are Eni, Royal Dutch Shell, Exxon Mobil, Total and KazMunaiGas, which own equal shares (16.81 per cent), as well as ConocoPhillips - 8.4 per cent and Japan's Inpex - 7.55 per cent.