Baku, Azerbaijan, Oct. 1
By Rashid Shirinov – Trend:
The government of Kazakhstan and the shareholders of the Karachaganak project have agreed on the method of sharing oil revenues, the press service of the Kazakh Energy Ministry reported.
"The government of Kazakhstan, represented by Ministry of Energy, Ministry of Finance and PSA LLP, as well as the shareholders of the Karachaganak project, represented by Eni, Shell, Chevron, Lukoil and KazMunaiGas (Karachaganak Petroleum Operating Consortium) have reached an agreement in principle on friendly settlement of the dispute," the statement reads.
The parties signed an agreement in principle setting out the main terms of settlement.
There were disagreements between Kazakhstan and the Consortium on the method of calculation of the parties' shares of profit products, so the country filed a lawsuit to international arbitration to protect its rights. However, given the long-term experience of cooperation, the parties, in the process of negotiations, found a "mutually beneficial way of amicable settlement of the dispute."
"These were very difficult negotiations with the Consortium, which lasted for about three years. Such a long period of time testifies not only to their complex content and nature, but also to the fact that we put emphasis on the economic interests of the state first of all, and, accordingly, we insisted on maximizing the benefits for the republic," Energy Minister Kanat Bozmubayev noted.
He added that by the end of the year it is planned to complete the deal and sign the final agreement.
"I want to emphasize that it was important for us to settle this dispute, as it brought uncertainty to the further development of the Karachaganak project. In this regard, one of the fundamental elements of these agreements is the commitment by the Consortium to timely implement important investment projects for the future development of Karachaganak," the minister stated.
According to the agreement in principle, the Consortium will pay Kazakhstan a compensation of $1.111 billion. Changes will be made to the mechanism of production sharing, which will provide the country with additional revenues of about $415 million until 2037 at an oil price of $80 per barrel.
The Consortium will also provide Kazakhstan with a 10-year loan for an infrastructure project or pay an equivalent value of the loan in the amount of about $200 million.
"Thus, the total value of this settlement is more than $1.7 billion, of which Kazakhstan will receive about $1.3 billion in the coming years," the ministry said.
Moreover, in addition to this proposal, the government agreed to accept the Consortium's obligations for the timely implementation of investment projects that are important for future development of Karachaganak. Preliminary investments are estimated at $5 billion with a possible additional increase in revenues for Kazakhstan until 2037 of about $23.5 billion at an oil price of $80 per barrel.
The parties also agreed on possible supply of hydrocarbons on commercial terms to local refineries and for the development of a gas chemical complex in the West Kazakhstan Region.
Karachaganak Petroleum Operating is a consortium of companies united for the implementation of the Karachaganak project. The shares in the consortium are as follows: Eni - 29.25 percent, Royal Dutch Shell PLC - 29.25 percent, Chevron - 18 percent, Lukoil - 13.5 percent and KazMunaiGas - 10 percent.