BG to earn $3bn in planned Karachaganak 10% sell-off

Oil and gas giant BG Group is set to receive $3bn in return for reducing its stake in the giant Karachaganak gas-condensate field in north-west Kazakhstan by one-tenth.

The Republic of Kazakhstan (RoK) and the contracting companies in the Karachaganak gas-condensate field have reached an agreement that will see Kazakhstan's KazMunaiGas (KMG) acquiring a 10% interest in the project. This will be done by each of the contracting companies - among them BG - transferring 10% of their rights and interest in the Karachaganak Final Production Sharing Agreement (FPSA) to KMG. BG's interest in the Karachaganak project will reduce to 29.25% from 32.5% as a result.

BG will initially receive a $1.5bn cash pre-tax consideration from RoK in exchange for a 5% interest, to be held by KMG, in the FPSA.

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Along with the other contracting companies, BG will receive a further $1.5bn pre-tax consideration, comprising $500m cash and $1bn non-cash, in exchange for transferring a second 5% interest in the FPSA to KMG.

The contracting companies will make a $1 billion loan to KMG to be repaid in instalments over a three-year period. The loan will be repaid from the proceeds of KMG's share of oil and gas sales from its 10% interest, backed by a guarantee from Samruk-Kazyna, the Kazakhstan sovereign wealth fund.

Ashley Almanza, BG's executive vice president, said: "Karachaganak is estimated to have hydrocarbons initially in place of 9 billion barrels of condensate and 48 trillion cubic feet of gas - to date less than 10% of that resource has been produced. Today's agreement ensures strong alignment with the Republic of Kazakhstan and provides the foundation for realising the vast remaining potential and value in Karachaganak."

The group will remain joint operator with Eni, which will also hold 29.25% (currently 32.5%). Chevron will hold 18% (20%); LUKOIL 13.5% (15%); and KMG 10%.

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