China to buy stake in Kazakhstan's Kashagan oilfield for reported US$5b

Xi agrees deal for 8.33 per cent interest in the giant Kashagan field, at reported cost of US$5 billion, supplanting India's bid for a stake

PUBLISHED : Sunday, 08 September, 2013, 12:00am
UPDATED : Sunday, 08 September, 2013, 4:10am

President Xi Jinping struck a deal with Kazakhstan yesterday that will give China a stake in its giant Kashagan oilfield.

Under the deal, Kazakhstan's state energy company KazMunaiGas is expected sell an 8.33 per cent stake in the project to state-owned China National Petroleum Corp (CNPC).

Xinhua reported both sides had agreed on China's purchase of the stake, but did not give further details. Kazakh government sources said it would cost China about US$5 billion.

The deal will give China additional clout in post-Soviet Central Asia, and blocks an attempt by regional rival India to get a stake in the project, 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 one to build an oil refinery in Kazakhstan, were among 22 agreements, worth some US$30 billion, reached during Xi's visit, Nazarbayev said.

He said the agreements on co-operation in the oil and gas sector were essential to his country's development.

"We suppose that the transaction will be closed by late September or late October," a Kazakh official said of the agreement to sell a stake in the Kashagan field.

In July the Kazakh government decided to use its pre-emptive right to buy an 8.4 per cent stake in Kashagan that US oil major ConocoPhillips was selling for US$5 billion.

ConocoPhillips, as part of a process of whittling down its worldwide portfolio of assets, announced last year it had agreed to sell the stake to ONGC, the overseas arm of the Indian state-run oil and gas company. The sale to CNPC would block India's plan to enter the Kashagan project.

Speaking at Nazarbayev University in Astana yesterday, Xi called for the building of "an economic silk road" in the region, involving improvements to infrastructure for navigation from the Pacific Ocean to the Baltic Sea and building a transport network to connect east, west and south Asia. Xi also called for the settlement of more deals using local currencies to reduce global financial risks.

In his speech, Xi also assured his audience that China would not seek a dominant role in regional affairs, "nor try to nurture a sphere of influence", Xinhua reported.

Xinhua also said both sides had agreed to fight the East Turkestan separatist movement, which China blames for outbreaks of violence in its far-western Xinjiang region.

Additional Reporting by Agence France-Presse


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