CITIC Completes Purchase Of Nations Energy Kazakh Assets

CITIC Completes Purchase Of Nations Energy Kazakh Assets

China’s CITIC Group has completed its purchase of JSC Karazhanbasmunai, a subsidiary of Canada’s Nations Energy, for $1.9bn. Nations Energy holds 94.6% of Karazhanbasmunai, operator and sole owner of rights to the onshore Karazhanbas oilfield in western Kazakhstan. CITIC announced the deal in October, but Kazakh officials questioned the wisdom of allowing more of the country’s assets to be sold to foreign companies (MEES, 27 November 2006). CITIC subsequently persuaded Kazakhstan to endorse the deal by giving it an option to purchase 50% of Karazhanbas at the acquisition price. “Pursuant to the approval received from the Kazakhstan regulatory authorities for CITIC’s acquisition, CITIC has granted to KazMunaiGaz (KMG) a call option under which KMG may acquire a 50% interest in Nations Energy, exercisable within a one-year period,” CITIC said. The Karazhanbas oilfield produces around 50,000 b/d of heavy crude oil with a gravity of 19°API. Reserves in the field are estimated at around 350mn barrels. Karazhanbasmunai holds rights on the concession until 2020 (MEES, 18 December 2006, 4 December 2006 and 20 November 2006).

Other recent developments in the Caspian region include:

• BP on 22 December said it had halted production at the offshore Shah Deniz gasfield due to technical problems – the gasfield had come on-stream a week earlier (MEES, 25 December 2006). On 3 January BP said the status of Shah Deniz had not changed and that efforts remained under way to resolve the difficulties.  

• The Batumi Oil Terminal (BOT) and Kazakhstan’s state-owned KazTransOil, a subsidiary of KazMunaiGaz, have finalized a 50:50 joint venture designed to establish the steady movement of Kazakh crude oil through Batumi. KazMunaiGaz on 22 December said the primary purpose of the new company would be to secure direct access to the Black Sea for Kazakh oil producing companies (MEES, 27 November 2006). BOT is estimated to have shipped 12mn tons of crude oil and products during 2006 (MEES, 18 December 2006).  

• Ukraine’s Ministry of Energy and Fuel on 28 December said an agreement was made between UkrTransNafta, Russia’s Transneft and the UK-Russian company TNK-BP to ship 9mn tons/year of crude through the Odessa-Brody pipeline during the next three years. The deal, calling for Russian oil to be shipped to the Black Sea port of Odessa, will likely prevent Kiev from realizing its goal to switch the flow of the pipeline to its original direction and export Caspian crude oil to Central Europe (MEES, 25 December 2006).  

• Azerbaijan’s state-owned oil company Socar on 27 December said it had annulled a memorandum of understanding (MOU) signed with ConocoPhillips in 2005 regarding the development of the offshore Umid Babek block. The MOU was valid for two years and Socar said it had not brought the desired results. Socar said BP, Total and Lukoil had expressed interest in the block, which may contain 1.5bn-2.2bn barrels of crude oil.  

• Agreements were signed in Tashkent on 28 December by members of a consortium formed to explore Uzbekistan’s offshore section of the Aral Sea. The consortium comprises Uzbekneftegaz, Lukoil Overseas, Petronas Carigali Overseas, CNPC International and KNOC Aral. The PSA will become effective in late January. A seismic contract will be tendered in February and seismic operations begin in March. The PSA was signed in August 2006 and each consortium member holds an equal share in the project.  

• China National Petroleum Corporation (CNPC) has won a license to explore five onshore blocks in Uzbekistan, China’s Ministry of Commerce said on 29 December. The license was awarded to CNPC’s China National Oil & Gas Exploration and Development Corporation on 22 December. The company will invest some $200mn to drill 27 wells in an exploration area covering 3.4 sq km by 2011. A commercial discovery will result in a 50:50 joint venture between CNPC and Uzbekneftegaz.  

• US-owned and Almaty-based Caspian Services on 2 January announced that it had signed a memorandum of understanding with Dubai-based Nico International and Kazakhstan’s Kazmortransflot for the establishment of a joint venture to build a vessel maintenance and repair facility at the Kazakh Caspian Sea port of Bautino. The facility will offer dry dock and floating repair facilities for vessels up to 60ms in length and weighing 600 tons.