Samruk Kazyna Buys Shares of KMG Kashagan B.V.

ASTANA – A deal worth $5.5 million was struck March 9 between Samruk Kazyna Sovereign Wealth Fund and KMG Kashagan B.V. The action followed a corresponding decision made in December by the wealth fund’s board of directors, according to the fund’s letter published March 11 on the Kazakhstan Stock Exchange (KASE) website.

KMG Kashagan B.V. owns 16.88 percent of Kashagan oil and gas field. The deal notification specifies the property which is the subject of the transaction is valued at $5.5 million, or 0.02 percent of Samruk Kazyna’s total assets. KMG Kashagan B.V.’s shares were purchased by advance payment, according to the document.

In July, Forbes.kz reported KazMunayGaz, which is completely owned by Samruk Kazyna, planned to sell 50 percent of its shares in Kashagan to Samruk Kazyna. The article emphasised KazMunayGas will continue to own the Kashagan shares using the wealth fund’s right of confidential management. It also highlighted the purchase price paid by Samruk Kazyna had to be determined based on an independent evaluation. Fifty percent of KMG Kashagan B.V.’s shares were expected to be sold before the end of 2015; however, the transactions were not completed until the beginning of the current year. Shares totalling $16.1 million were bought in January and shares worth $4.9 million were purchased in February. The fund has therefore already financed KMG Kashagan B.V. in the amount of $26.5 million.

Discovered in July 2000, Kashagan has been described as the largest oil and gas field outside the Middle East found in the past 30 years. Its projected output was estimated as close to that of the Ghawar field in Saudi Arabia. The field is being developed by a group of companies including AgipKCO (Eni) (16.81 percent), Exxon Mobil (16.81 percent), KazMunayGas (16.81 percent), Shell (16.81 percent), Total (16.81 percent), China National Petroleum Corp (8.33 percent) and INPEX (7.56 percent). Eni is responsible for the first phase of development, while Shell is responsible for production operations, according to offshore-technology.com.

The project suffered several delays and costs increased from $57 billion to $187 billion. North Caspian Operating Company (NCOC), a new joint operating company, became the operator. The first production was achieved in September 2013, but had to be halted for several weeks as gas leaks were detected from a pipeline connecting the field to the onshore processing facility. Sulphide stress corrosion was identified as the cause of the leaks.

Standard & Poor’s (S&P) excluded Kashagan from the factors influencing Kazakhstan’s economic prospects due to repeatedly-delayed commercial production at the oilfield in October.

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