China buys into Kashagan oil project for $5 billion

Sep 08 2013, 01:02 IST
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SummaryThe Kazakh deal comes after Astana decided in July to use its pre-emptive right to buy an 8.4 per cent stake in Kashagan that US oil major ConocoPhillips was selling for $5 billion.

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.”

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

The Kazakh deal comes after Astana decided in July to use its pre-emptive right to buy an 8.4 per cent stake in Kashagan that US oil major ConocoPhillips was selling for $5 billion.

Houston-based ConocoPhillips, whittling down its worldwide portfolio of assets, announced last year it had agreed to sell the stake to ONGC Videsh Limited, the overseas arm of the Indian state-run company ONGC.

The sale to CNPC blocks India’s plan to enter Kashagan. Kazakhstan, home to 3 percent of the world’s recoverable oil reserves, has moved in recent years to exert greater management control and secure bigger revenues from foreign-owned oil and gas projects.

Kashagan and neighbouring fields in the North Caspian hold estimated reserves of 35 billion barrels of oil, with between 9 billion and 13 billion barrels recoverable.

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