RPT-UPDATE 2-Kazakhstan may pay up to $1.1 bln for gas field stake

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04.10.2011 18:32

* Karachaganak gas field operated by BG Group, ENI

* Kazakhstan hopes to start price talks soon

* Kazakhstan will not drop tax claims in return for stake (Repeats to add byline)

By Raushan Nurshayeva

ASTANA, Oct 5 (Reuters) - Kazakhstan is willing to pay up to $1.1 billion to enter the international consortium developing the Karachaganak gas field and settle a protracted ownership dispute, the head of its sovereign wealth fund said on Wednesday.

Timur Kulibayev, chief executive of the Samruk-Kazyna fund, told a news conference that Kazakhstan planned to acquire a 10 percent stake in the field, operated by BG Group and ENI , ahead of a challenging third phase of development.

"I will tell you the range ... it's between $700 million and $1.1 billion," Kulibayev later told reporters.

"There are two phases there -- the first one is the settling of disputable issues," he said. "Then the second phase will follow -- commercial negotiations on the (stake) purchase."

Kazakhstan, Central Asia's largest economy, has become more assertive over its natural resources in recent years and has sought to revise agreements struck with foreign energy companies when it lacked cash after the Soviet Union's demise.

The government has long expressed a desire to join the international consortium that operates the Karachaganak field in northwestern Kazakhstan, which contributes 49 percent of the gas produced by the country and 18 percent of its crude oil.

"In principle, we plan to complete all our discussions by the end of the year," Kulibayev told the news conference.

"In general we have taken the decision that KazMunaiGas will enter the Karachaganak project as a partner holding a 10 percent stake."

Kulibayev, who is married to the middle daughter of President Nursultan Nazarbayev, was appointed head of Samruk-Kazyna after the president won re-election in April. The fund is the owner of KazMunaiGas, the state oil and gas company.

Kulibayev, who is also chairman of KazMunaiGas, said the deal to enter the Karachaganak project would be "a package agreement".

"We name the price (range), depending on how the talks will be completed by the (Kazakh oil and gas) ministry," he said. "But we hope the ministry will finish them soon, and in the near term we will be able to proceed with commercial talks."

Chris Finlayson, BG's executive vice-president and managing director for Europe and Central Asia, said on Tuesday that talks were constructive and that he expected a resolution by the end of the year. 

TAX CASES

Italy's ENI and Britain's BG Group are the biggest shareholders in the Karachaganak consortium, holding 32.5 percent each. U.S. major Chevron has 20 percent and Russia's LUKOIL has 15 percent.

A source close to negotiations told Reuters in June that Kazakhstan planned to acquire its 10 percent stake in two parts: 5 percent in cash at market price and 5 percent in exchange for dropping various legal claims, except for outstanding tax cases.

Kulibayev gave no more precise details on this.

The government, which says it wants to exercise control over costs for the Phase Three development of Karachaganak, has brought several cases against the operators, accusing them of overstating costs and violating tax and ecological laws.

These have included the preparation of tax claims worth $1.2 billion against Karachaganak Petroleum Operating Group (KPO) relating to the 2005-2008 period, a source told Reuters last October.

Kazakh Oil and Gas Minister Sauat Mynbayev said on Tuesday that Kazakhstan would not drop its back-tax claim to the operators of Karachaganak in return for a stake in the field. (Reporting by Raushan Nurshayeva; Writing by Dmitry Solovyov and Robin Paxton; editing by Keiron Henderson) 

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