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Kazakh state energy firm weighs foreign partnership

Kazakhstan’s state energy firm KazMunaiGas is considering strategic partnerships with Western players to gain access to technology as it ramps up production with a long-term aim of tripling output.

KazMunaiGas President Uzakbai Karabalin also told Reuters in an interview that as his ambitious company grew, it had been looking carefully at different state-run energy giants around the world and felt Statoil was a good example to follow. “We think strategic partnership with famous companies that have the best experience, the best management and technology, would be very useful for us,” he said at the company’s headquarters in Kazakhstan’s newly built steppe capital Astana. “We are considering this possibility because we are not as competitive on the global market today as, say, Exxon, Chevron or Shell. That’s why of course we have to weigh up our capabilities realistically,” he added.

Talks had not yet started but KazMunaiGas was sizing up potential partners to see who it could work with, he added. Asked if Statoil could be the partner, Karabalin said: “Why not? It could be.” He would not give further information about who a possible partner might be, beyond indicating that it would be a Western firm. KazMunaiGas, which is fully state-owned but has a listed exploration and production arm KazMunaiGas E&P, wants to first double and then triple its output, Karabalin said. He would not be drawn on a timeframe for this. KazMunaiGas produces around a quarter of Kazakh oil and its growth is at the centre of the Central Asian state’s plans to join the ranks of the world’s top 10 crude producers in a decade. “We are strengthening our capacity in Kazakhstan,” Karabalin said. “KazMunaiGas is six years old we are quite an aggressive company in the best sense of this word. And where else should we look for assets if not here, in this oil-rich country?”


KASHAGAN

Kazakhstan unsettled foreign investors earlier this year, when it used KazMunaiGas as a vehicle to double its stake in the giant Kashagan field, the world’s biggest oil discovery in the last 30 years, at the expense of Western partners following a dispute over delays and cost overruns. But Karabalin said his company had no immediate plans to take a still bigger slice of that particular pie. “Our stake (in Kashagan) has been set at 16.8%. At the moment it does not make sense to state that we want 50% or 100% or so,” he said, citing the enormous investments required to bring the development on stream. “Overall in terms of production we think the main rise in production will happen with the launch of Kashagan,” Karabalin said. “Before that we have possibilities at TengizChevroil, which will double its production to 25 million tons this year and of that 20% is ours.” TengizChevroil, led by US oil firm Chevron, is a consortium developing Tengiz, one of Kazakhstan’s top fields.

Karabalin said the global credit crunch and the resulting squeeze on lending, which has hit Kazakh banks particularly hard, was the biggest risk he saw. “Stability for oil companies is really important,” he said. “We hope the mortgage crisis and other aspects of the market will calm down, thus lowering our risks.” Karabalin said his company had not cut any investments so far because of the credit crunch but also said: “We buy very big assets and this cannot go on forever. We are following our financial capabilities and limits very closely.” KazMunaiGas liked Statoil because it was a good example of a company set up and run by the state and favored by the government until it was big enough to compete, Karabalin said. It was now a “very competitive” firm.

Statoil was formed in 1972 as Norway’s state oil champion and merged in October 2007 with fellow Norwegian energy firm NorskHydro to form StatoilHydro, the world’s largest offshore oil and gas company present in 40 countries worldwide. Karabalin criticized a proposed government plan to impose an oil export duty from next year, saying it would have a negative impact on the sector and distort its balance of payments. “Introducing export duties will certainly affect the nature of projects,” he said. “The Finance Ministry has vowed to keep this balance in place. I think this balance will be found.” (Reuters)