August 31, 2010 / 12:34 PM / in 8 years

UPDATE 1-KMG EP looks beyond Kazakhstan in BG North Sea deal

* Acquires 35 percent stake in BG project

* Takes first step outside Kazakhstan

* BG eyes “new era” of cooperation with Kazakhstan

(Adds detail, background)

By Raushan Nurshayeva

ASTANA, Aug 31 (Reuters) - KazMunaiGas Exploration & Production KMGq.L agreed on Tuesday to acquire a 35 percent stake in a North Sea exploration licence owned by British gas producer BG Group BG.L, its first project outside Kazakhstan. KMG EP, a London-listed company majority owned by Kazakh state oil and gas company KazMunaiGas [KMG.UL], said the licence area included the White Bear prospect close to existing assets operated by BG off the British coast. BG will continue to operate the licence on behalf of both partners in the project, KMG EP said, adding the “financial risks” associated with the project at the drilling stage were $25-$30 million.

The agreement is the first official venture between KMG EP and BG Group since the two signed an upstream cooperation agreement in December 2008.

Mark Rollins, BG Group’s senior vice-president for Central Asia and president of BG Kazakhstan, said the deal would result “in a new era of beneficial cooperation for the strategic partnership between BG Group and the Republic of Kazakhstan”.

BG, along with Italian energy company Eni SpA (ENI.MI), led a consortium of foreign companies developing the potentially lucrative Karachaganak oil and gas project in Kazakhstan.

The foreign shareholders, which include U.S. company Chevron Corp (CVX.N) and Russian group LUKOIL (LKOH.MM), have been preparing to cut their stakes to allow KazMunaiGas to acquire 10 percent, several sources have told Reuters. [ID:nLDE67C1PF]

Eni chief executive Paolo Scaroni confirmed on Aug. 25 the company was holding talks on cutting its stake in the Karachaganak project, although he did not confirm Kazakhstan wanted a 10 percent stake. [ID:nLDE67O1ZE]

Kazakhstan has accused the Karachaganak operator of violating immigration laws and overstating costs by $1.3 billion. The consortium denies all wrongdoing, saying it has acted in accordance with the law and its agreements with Kazakhstan.

KMG EP boosted crude oil output by 11 percent year-on-year in the first half of 2010 after acquiring a stake in oil firm PetroKazakhstan Inc, majority owned by state-run China National Petroleum Corp. [ID:nLDE66R0C9] (Writing by Robin Paxton; Editing by Dan Lalor)

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