France and Kazakhstan Sign Strategic Oil & Gas Sector Agreements

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Researched by Industrial Info Resources (Sugar Land, Texas)--France and Kazakhstan signed several agreements involving the countries' oil and gas sectors during French President Nikolas Sarkozy's recent visit to Kazakhstan. President Sarkozy and Kazakhstani President Nursultan Nazarbayev have announced the signing of 24 agreements that seek to build a closer geopolitical relationship between the two nations.

A draft agreement has been signed with a French consortium led by pipeline company SPIE Capag (Cergy-Pontoise, France) of the Vinci Group (Paris, France) for the laying of an oil pipeline from the offshore Kashagan oil field in Kazakhstan to Baku in Azerbaijan. The export pipeline will transport oil from the Caspian Sea to Baku and onward through pipelines to Europe that bypass Russia, helping secure a steady supply of oil for Europe. The project will create a foundation for the export of Kazakhstani oil and gas to Europe. It will enhance the economy of Kazakhstan and increase the country's presence in the international market. Although the commercial value of the agreement has not been disclosed, it is believed to be worth about $1.75 billion.

The pipeline agreement followed a fuel marketing joint venture agreement signed by Anne Lauvergeon, CEO of Areva SA (EPA:CEI) (Paris), and Vladimir Shkolnik, president of state-run nuclear holding company Kazatomprom (Almaty, Kazakhstan). IFASTAR, the 51:49 joint venture company to be set up by Areva and Kazatomprom, will conduct a feasibility study to assess the Asian market for sale of integrated fuel packages, as well as the economical and technical feasibility of setting up a fuel-manufacturing line at Kazatomprom's existing Ulba Metallurgical Plant. For related news item, see October 9, 2009, article - Areva and Kazatomprom to Produce, Market Nuclear Fuel in Asia.

The third agreement was signed by Total SA (NYSE:TOT) (Paris) and GDF Suez SA (EPA:GFZ) (Paris) with KazMunaiGas (KMG) (Astana, Kazakhstan), the state-run gas company of Kazakhstan. Under this agreement, the French companies will obtain a 25% stake in the Khvalynskoye gas field in the Caspian Sea on the border of Russia and Kazakhstan. According to an agreement signed in 1988, Russia has rights on a few gas fields such as the Khvalynskoye gas field on the Kazakh-Russia border, enabling the country to obtain all the gas produced from these fields. The Khvalynskoye gas field has, until now, been owned equally by KazMunaiGas and Lukoil (OTC:LUKOY) (Moscow, Russia), which was also operating in the field.

Development of the gas field will be implemented under a production-sharing agreement that is under discussion. After all agreements are in place, the gas field project will be owned by a consortium in which KMG holds a 25% stake, Lukoil has 50%, and Total and GDF Suez own 17% and 8%, respectively. Although the cost of acquiring the 25% stake has not been disclosed, GDF Suez and Total will make a joint investment of $1 billion in the development project. The gas field is tentatively scheduled to come on stream by 2016 at the earliest. Although officials have stated that the complete potential of the gas field has not yet been ascertained, Total CEO Christophe de Margerie has suggested that production was likely to be between 8 billion and 9 billion cubic meters per year of natural gas.

During a Kazakh-French business forum that took place during the visit of the French president, 12 agreements were signed between the two nations. According to Timur Nurashev, head of the investment committee of the Industry and Trade Ministry of Kazakhstan, the contracts signed during the forum are worth about $6 billion, to which France has committed an investment of about $1.8 billion. One of the agreements signed was between BNP Paribas SA (EPA:BNP) (Paris) and Development Bank of Kazakhstan (Astana, Kazakhstan), under which BNP Paribas will extend a loan of about $15 million to be used primarily for energy projects. BNP Paribas had earlier opened a credit line of more than $290 million for this purpose.

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