ASTANA - The Kashagan field in the Caspian Sea is one of the trump cards of Kazakhstan in conversation between the government and foreign investors. This Central Asian republic hopes much for development of the field. Thus, according to EBRD, the GDP growth will be 6% in Kazakhstan in 2013 due to introduction of the first phase of the Kashagan.

It is understandable, because the recoverable oil reserves of Kashagan are estimated by experts at 11 billion barrels and total geological reserves of oil stock are 35 billion barrels. It is believed that it is the largest oil field in the world after the Prudhoe Bay in Alaska (discovered in 1968).

Recall that the date of production of the “first oil” in Kashagan was postponed several times due to difficult geological conditions. However, the shareholders of the international consortium of NCOC (North Caspian Operating Company), which is currently engaged in development of the field, after a long phase of negotiations, finally have decided, that the commencement of commercial oil production at the Kashagan field is expected in June this year.

Phase I of the project involves production volume of about 370,000 barrels of oil per day. However, the joy of the expected “first oil”, which should be very close, was slightly overshadowed by the news that one of the shareholders of the consortium, American ConocoPhillips, decided to withdraw from the project.

In the autumn last year, in October, the US company declared on its website that it officially had notified the authorities of Kazakhstan and the partners of its intention to sell its stake (8.4%) of the project to Indian ONGC Videsh Limited. The deal amount is $5 billion.

A little later, at the end of January this year, Kazakh national company KazMunayGas reported that it had made a deal with ConocoPhillips to purchase its interest in another project in Kazakhstan - project “H” on the Caspian shelf. Thus, official confirmation of withdrawal of American ConocoPhillips from the two projects in Kazakhstan has been announced.

The reasons for leaving by ConocoPhillips were reported earlier. The global financial crisis has not passed in vain for this company, which is why it had to give up their projects around the world, not only in Kazakhstan.

However, there appeared lots of questions on the two Kazakh projects. The first question is: who will get the ConocoPhillips stake in Kashagan project?

KazMunayGas, which is a shareholder in the consortium of NCOC and at the same time represents the interests of the Kazakhstan’s government in the project, told reporters Kazakhstan has not waived its pre-emptive right to purchase shares of ConocoPhillips in the Kashagan project under the legislation.

“Kazakhstan has not waived its pre-emptive right of redemption, as provided by the legislation of the country,” said the report of the national company.

As emphasized in KazMunayGas, now the question is being considered by the Interdepartmental Commission on development of oil and gas and energy industries. The same comments were given to the media by the Minister of Oil and Gas of Kazakhstan Sauat Mynbayev.

Meanwhile, an informed source of oil and gas society told New Europe, that Kazakhstan decides to repurchase ConocoPhillips shares in Kashagan not earlier than June. “It is premature to say that Kazakhstan has waived its right to repurchase the shares. The Government of the Republic may decide before June 2013,” said the source. In this case, there is another question: If Kazakhstan decides to exercise his right, then what funds it will use to buy out ConocoPhillips, if the transaction price is $5 billion?

At a press conference in Astana, National Welfare Fund Samruk-Kazyna Managing Director Malik Salimgereev said KazMunayGas is currently considering purchase of the shares. He noted that KazMunayGas can attract foreign loans to purchase the shares of ConocoPhillips in the project of Kashagan in case of a positive decision on the purchase. Some experts have expressed a wish that Kazakhstan could easily raise funds for the deal of $5 billion from the National Fund, which to date has already accumulated more than $70 billion.

Kashagan in the North-Caspian is developed by the consortium of North Caspian Operating Company (NCOC), whose shareholders are Agip Caspian Sea BV (16.81%), KMG Kashagan BV (16.81%), ConocoPhillips North Caspian Ltd. (8.4%), ExxonMobil Kazakhstan Inc. (16.81%), Inpex North Caspian Sea Ltd. (7.56%), Shell Kazakhstan Development BV (16.81%) and Total EP Kazakhstan (16.81%).

If the situation with Kashagan will be clarified only by the summer, when Kazakhstan announces its final decision, “N” project is already clear.

On 25 January, KazMunayGas acquired a stake of ConocoPhillips in the project “N” at the rate of 24.5%. Following the transaction, KMG has acquired 75.5% of mineral rights in the project “N” and 75.5% interest in N Operating Company LLC. Now, in this project there are two companies:  KazMunayGas with 75.5% and the remaining 24.5% is owned by Arab Company Mubadala.

Commenting on the deal on “N” project, Mynbayev said that KazMunayGas acquired a share of American ConocoPhillips at $32.5 million. “This transaction is a successful and commercially attractive for KMG,” commented KazMunayGas on the deal. With that, the KMG stressed that “the value of the transaction was a much smaller than the historical costs incurred by ConocoPhillips in the project and the estimated market value of the asset.”

However, the Kazakh company is silent on how much less it cost, although it is known that exploration of a well costs at least $180 million. In “N” project such works were carried out.

Meanwhile, according to the audit of the company’s reserves by Gaffney, Cline & Associates the contingent resources in the area “N” make about 244 million tonnes, conventional oil reserves are 31.5 million tonnes and contingent gas reserves are about 19 billion cubic metres of gas. And according to KazMunayGas, the expected start of production on one of the block structures of “N” in the Kazakhstan part of the Caspian shelf is planned for 2018-2019. So, in conclusion, ConocoPhillips suffered serious costs after withdrawal from the project “N”. Perhaps, with the sale of its stake in Kashagan, the US company can recoup their costs generally incurred in Kazakhstan.