Russia and Kazakhstan sign $23 billion Caspian oil deal

The Russian and Kazakh state oil firms, Rosneft and KazMunaiGas, signed a deal on Wednesday to invest $23 billion in a 55-year production sharing agreement for the Kurmangazy oilfield in the Caspian Sea. Kazakh first deputy energy minister Baktykozha Izmukhambetov told reporters recoverable oil reserves at Kurmangazy were estimated at 980 million tonnes (more than 7 billion barrels).
If confirmed Kurmangazy would prove to be one of the world's largest deposits and help Kazakhstan join the league of top oil producers as the country wants to triple production to over 3 million barrels per day by 2015.
Once under way, the project will be the fourth biggest in Kazakhstan, a sprawling Central Asian state, after the onshore Tengiz and Karachaganak fields and the offshore Kashagan field, all led by Western majors such as US major Chevron, Italy's ENI and Britain's BG.
Rosneft and Kazakhstan had disputed the terms of the Kurmangazy PSA for more than a year after Kazakhstan toughened rules on production sharing agreements and raised oil taxes.
Izmukhambetov said the Kazakh state budget would receive more than $30 billion from the 50-50 PSA over the course of the project, which will include 10 years of exploration followed by 45 years of extraction.
Rosneft had wanted Kazakhstan to cut the bonus for the PSA to $5 million from $150 million and the firm's chief executive Sergei Bogdanchikov told a news conference Kazakhstan had agreed to accept $50 million from the Russian and Kazakh firms. "We have committed to pay the bonus to Kazakhstan within a month... We will work under Kazakhstan's existing tax regime. Such was a decision and we are fully satisfied," he said.
Rosneft, the Kremlin's only oil company, jumped to the top league of Russian oil producers last year after it bought the key unit of stricken oil major Yukos, Yugansk, for $9.4 billion.
Yugansk was effectively nationalised following a state auction in December to settle some of the $27.5 billion of back-tax claims against Yukos.
But Rosneft's debt also jumped to around $23 billion and analysts doubt its ability to fund all its massive greenfield projects inside and outside Russia in the near future.
The Kurmangazy field lies in what were disputed areas of the shallow Caspian Sea but which, along with two other fields, Russia and Kazakhstan agreed to develop jointly in 2003.
Kazakhstan had been in talks with France's Total on selling it half of its Kurmangazy stake. Total had expressed interest in the 25-percent stake but also expressed concern about the project's profitability under the new tax code.
Asked about talks with Total, KazMunaiGas President Uzakbai Karabalin told Reuters: "We first have to sign a deal with the Russians. Talks with the French may follow later."
He also said the exploration period at Kurmangazy could be shortened to 6 years from the 10 years set out in the PSA, but declined to name possible annual production targets.