Russ Oil-Gas

04.10.2006 MosNews - On Tuesday, Oct. 3, Russia and Kazakhstan signed an agreement for creation of a joint venture that would process natural gas from the Central Asian state’s giant Karachaganak field. Officials said they hoped to finalize the venture, based on Russia’s Orenburg gas processing plant, by the year’s end after the bilateral declaration was signed at talks between presidents Vladimir Putin and Nursultan Nazarbayev in Uralsk, Kazakhstan. But loose ends remain to be tied up after more than a year of talks, with pricing terms for the processing of up to 15 billion cubic meters of sulfur-laden Karachaganak gas still to be agreed with Western energy majors. “Kazakhstan and Russia will become 50-50 owners of the Orenburg plant, and will invest $1.5 billion in its expansion —- half of which will come from Kazakhstan,” Kazinform news agency quoted Kazakhstan’s Nazarbayev as telling reporters. Russia will be represented by gas monopoly Gazprom, while Kazakhstan’s KazMunaiGas state energy firm will own the other half. Gazprom is keen to contract incremental supplies of gas from Central Asia to cover Russia’s domestic needs, freeing up its own production to supply to lucrative European export markets. Karachaganak is co-led by Italy’s ENI and Britain’s BG, which both hold 32.5 percent stakes, while U.S. Chevron owns 20 percent and Russia’s Lukoil has a 15 percent interest. Russian madia reported last month the Russian-Kazakh venture may face problems because the Karachaganak group was not prepared to sell gas at low prices, although it mainly focuses on gas condensate production. The venture between Gazprom and KazMunaiGas would deliver some of the processed Karachaganak gas back to the Kazakh market, KazMunaiGas’s first vice-president, Zhaksybek Kulekeyev, said earlier in Almaty. The Kazakh side proposes paying $54 per thousand cubic metres to the venture to supply 6 billion cubic meters of processed gas per year to Kazakhstan, Kulekeyev said. But it remained unclear what the pricing terms would be for the remaining 9 billion cubic meters — enough to supply a country such as Austria for one year — that both sides have said they want to put through Orenburg. Gazprom, the world’s largest gas producer, supplies Europe with a quarter of its gas needs at average price of $230 per 1,000 cubic meters. Separately, Kazakhstan, neighboring Uzbekistan and Russia continue to negotiate the terms of a swap deal under which Uzbekistan would supply gas consumers in southern Kazakhstan and Kazakhstan would in turn export gas to Russia, Kulekeyev said. The three partners set up the deal to swap 3.5 billion cubic meters per year of gas in 2007-2009 by signing a memorandum of understanding in the Uzbek capital, Tashkent, last month. “We are still at the discussion stage on the Uzbek gas swaps,” Kulekeyev said, quoted by Reuters. “Talks will continue —- we have time until the end of this year. I think we will be able to achieve a result on this question.”