China buys into giant Kazakh oilfield for $5 billion

Sat Sep 7, 2013 9:18am EDT
 
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By Mariya Gordeyeva

ASTANA (Reuters) - Chinese President Xi Jinping struck a deal with Kazakhstan on Saturday giving China a stake in its giant Kashagan oil project, a highlight of his tour of Central Asia to secure hydrocarbons for the world's largest energy consumer.

The $5 billion deal further increases China's rising clout in post-Soviet Central Asia, once Russia's imperial backyard, and blocks an attempt by global rival India to get a stake in the oilfield, the world's largest oil discovery in five decades.

"The two countries have agreed on China's shareholding in the development of the Kashagan deposit," Xi told a news briefing after talks with Kazakh President Nursultan Nazarbayev. "The two governments hail and support this agreement."

Oil and gas deals, including on building an oil refinery in Kazakhstan, are among 22 agreements worth some $30 billion reached during Xi's visit, Nazarbayev said.

Under the Kashagan deal, Kazakhstan will sell 8.33 percent of the offshore oilfield in the Caspian Sea to China for about $5 billion.

The sale and purchase agreement was signed by the heads of Kazakh state oil and gas company KazMunaiGas and China National Petroleum Corp CNPET.UL (CNPC) in the presence of the two presidents.

"We suppose that the transaction will be closed by late September or late October," a Kazakh official told Reuters.

CNPC will also pay up to $3 billion to cover half of Kazakhstan's financing of the second phase of Kashagan's development, KazMunaiGas head Sauat Mynbayev told reporters. This phase is expected to start after 2020.   Continued...

 
An aerial view shows artificial islands on Kashagan offshore oil field in the Caspian sea, western Kazakhstan, April 7, 2013. Picture taken April 7, 2013. REUTERS/Anatoly Ustinenko