China National Petroleum Corp. (CNPC) plans to pay about $5 billion for a stake in Kazakhstan’s biggest oil field, people with knowledge of the matter said.
CNPC is planning to acquire 8.33% in the Kashagan project from state oil company KazMunaiGaz National Co., two of the people said, asking not to be named before the deal is public. An announcement may be made as soon as next week, two of the people said.
KazMunaiGaz will maintain its holdings in Kashagan, due to start production in September, by exercising an option to acquire 8.4% of the project from ConocoPhillips (NYSE: COP), the people said. While Conoco agreed to sell to India’s Oil & Natural Gas Corp. last year, as the state oil company, KazMunaiGaz has the right to step in and buy the shares.
CNPC’s largest overseas acquisition will deepen Kazakhstan’s relationship with China as the start of production at Kashagan, eight years late and at double the original cost, boosts oil exports. A pipeline linking Kazakhstan and China opened in 2006 and is being expanded to 400,000 barrels a day from 240,000 barrels a day.
Li Runsheng, CNPC’s Beijing-based spokesman, didn’t answer three calls to his office. Officials at KazMunaiGaz and the Kazakh government declined to comment immediately and asked for written questions. ONGC Chairman Sudhir Vasudeva didn’t answer two calls to his mobile phone seeking comments.
After KazMunaiGaz completes both deals it will have a stake of 16.88% of the Kashagan project, one of the people said. Exxon Mobil Corp. (NYSE: XOM), Royal Dutch Shell Plc (NYSE: RDS-A, RDS-B), Total SA (NYSE: TOT) and Eni SpA (NYSE: ENI) hold 16.81% each. Japan’s Inpex Corp. has 7.56%.
Double Estimates
Kashagan, a Caspian Sea field slated to produce as much as 370,000 barrels of oil a day, will cost $48 billion, double early estimates.
The deal will be CNPC’s largest overseas acquisition, overtaking a $4.2 billion deal earlier this year to buy a stake in gas fields in Mozambique from Italy’s Eni.
Kazakh President Nursultan Nazarbayev said yesterday that the country is studying whether to buy Conoco’s stake in Kashagan, according to his website.
Copyright 2013 Bloomberg.
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