BG Group Plc (BG/) completed an agreement giving Kazakhstan 10 percent of the Karachaganak oil project and exempting the venture from paying export duty.
The government acquired the stake for $2 billion in cash and $1 billion in non-cash payments, BG Group said today in a statement. Tax of $1 billion is payable on the gain from the sale, it said. The Karachaganak partners won’t pay export duty for the remaining 26 years of their production sharing deal.
The agreement also allows the partners to deliver an extra 2 million metric tons of oil annually through the Caspian Pipeline Consortium’s link in the period, BG Group said. The additional shipments will begin at 500,000 tons and rise to 2 million tons as the pipeline expands in the next three years.
The deal settles a more than two-year dispute between the partners and Kazakhstan, the biggest energy producer in central Asia, over paying tax and recovering costs. The production- sharing agreement allows the investors to recoup their costs before the government takes its share of the oil revenues.
Kazakh Oil Minister Sauat Mynbayev and Finance Minister Bolat Zhamishev were scheduled to sign the agreement with the partners, according to a government order dated June 25 and published today in state-run newspaper Kazakhstanskaya Pravda.
BG Group’s interest in the project falls to 29.25 percent today from 32.5 percent, it said. Eni SpA (ENI)’s stake also dropped to 29.25 percent, while Chevron Corp. has 18 percent, OAO Lukoil 13.5 percent. State-run KazMunaiGaz National Co. gets 10 percent. Karachaganak is estimated to hold 9 billion barrels of condensate and 48 trillion cubic feet of gas, BG said.