China’s President Xi Jinping on Saturday will oversee his country’s entry into Kashagan, a vast oilfield in Kazakhstan, as he tours post-Soviet Central Asia to secure hydrocarbons for the world’s largest energy consumer.
Kazakhstan will sell 8.33 percent of the offshore oilfield to China for about $5 billion in a deal to be signed during Xi’s visit to the capital Astana later on Saturday, Kazakh government sources told Reuters.
The sale and purchase agreement will be signed by the heads of Kazakh national oil and gas company KazMunaiGas and China National Petroleum Corp CNPET.UL(CNPC), said the officials, who requested anonymity.
“We suppose that the transaction will be closed by late September or late October,” one of the officials said.
Chinese companies are already involved in a number of oil projects in the vast resource-rich neighbor, which is five times the size of France but has a population of just 17 million.
But its entry into the mammoth Kashagan oil field, the world’s largest oil discovery in five decades, is a landmark, further cementing its rising clout in Central Asia, which was once Russia’s imperial backyard.
This week, Xi visited Kazakhstan’s neighbor Turkmenistan, which holds the world’s fourth-largest natural gas reserves, and oversaw deals aiming to boost gas supplies and build a pipeline to China.
The Kazakh deal comes after Astana decided in July to use its pre-emptive right to buy an 8.4-percent stake in Kashagan that U.S. oil major ConocoPhillips was selling for $5 billion.
Houston-based ConocoPhillips, whittling down its worldwide portfolio of assets, announced last year it had agreed to sell the stake to ONGC the overseas arms of the Indian state-run company.
The move to sell to CNPC blocks the plan by China’s regional rival India to enter the Kashagan project.
Kazakhstan, home to 3 percent of the world’s recoverable oil reserves, has moved in recent years to exert greater management control and secure bigger revenues from foreign-owned oil and gas projects.
KazMunaiGas entered the Kashagan consortium as a shareholder in 2005 and has since then doubled its stake to 16.81 percent.
Kashagan and the neighboring fields in the North Caspian Sea hold estimated reserves of 35 billion barrels of oil in place, with 9 billion to 13 billion barrels being recoverable.
Kazakh officials have said they expect the giant reservoir off western Kazakhstan to produce first oil later this month.
A multinational consortium developing the field has invested some $50 billion in about 13 years, making it the costliest oil project in the world.
During Kashagan’s development, production will be gradually increased to 370,000 barrels per day in the second stage from 180,000 bpd in the first stage in 2013-14, according to North Caspian Operating Company (NCOC), which is developing the field.
Italy’s ENI, U.S. major Exxon Mobil, Royal Dutch Shell and France’s Total currently all hold 16.81 percent stakes in Kashagan. Japan’s Inpex owns 7.56 percent.