Re Karachaganak Project
AGREEMENT SIGNED WITH KAZAKHSTAN ON KARACHAGANAK
LUKOIL Overseas announces that the contracting companies in the Karachaganak Petroleum Operating Consortium have signed an agreement with the Republic of Kazakhstan on the further comprehensive development of the project.
In particular, the Consortium contracting parties will transfer 10% of their interest in the Final Production Sharing Agreement (FPSA) for Karachaganak oil and gas condensate field to the national company KazMunaiGas (KMG). The transfer will be done pro rata to the current participation interests owned by the parties to the project. The consideration will be worth USD 3 billion, including non-cash equivalent. Of the total consideration, the contracting parties will be responsible for paying taxes worth USD 1 billion to the budget of the Republic of Kazakhstan. To finance the acquisition of the stake, the Consortium will accommodate KMG with a loan of USD 1 billion, on market conditions, to be repaid over a period of three years.
Besides, the Republic of Kazakhstan agreed to grant the Consortium an additional quota for oil pumping via the Tengiz-Novorossiysk oil pipeline owned by the Caspian Pipeline Consortium (CPC) in the amount of 0.5 million tons per year with a further increase of up to 2 million tons per year as the throughput capacity grows.
The agreement provides for a mutual revocation of all lawsuits and also for settlement of tax claims and of issues pertaining to the payment of export custom duties. The agreement shall come into effect on June 30, 2012 after the parties meet a number of precedent conditions.
The Karachaganak field, located in West Kazakhstan Region, was discovered in 1979, its commercial development started in 1984. The remaining reserves of the field come to 1.2 billion tons of oil and gas condensate and 1.35 trillion cubic meters of gas. The FPSA on Field Development was signed in 1997 and shall last for 40 years. The Karaganchak Petroleum Operating Consortium currently comprises BG Group (32.5%), ENI Group (32.5%), Chevron (20%) and LUKOIL (15%).
Commented Andrey Kuzyaev, President of LUKOIL Overseas: "The agreements reached will form a basis for a new stage in the development of the Karachaganak project, with greater investments, higher production and sales of gas, and with a longer plateau in the production of liquid hydrocarbons".