Russia's largest independent oil producer OAO Lukoil (LKOH.RS) won't face Kazakh government opposition to a deal to buy full control of Turgai Petroleum and hopes to close a deal by the end of the year, a Lukoil spokesman said Tuesday.
Monday, the Kommersant daily reported that Lukoil plans to exercise its preemptive right to acquire 100% of the Kazakh firm, which operates the Kumkol field containing about 177 million barrels of proven oil reserves.
Already holding a 50% stake in the company, Lukoil will - for an undisclosed price - buy the other half from PetroKazakhstan Inc., which is majority owned by China National Petroleum Corporation, or CNPC, China's largest oil and natural gas company.
Analysts estimated the full value of Turgai Petroleum, which last year produced 3.5 million metric tons of oil, to be around $1.7 billion.
A Lukoil spokesman said that Lukoil had been in talks with CNPC over a deal that would give the Russian company a stake in assets in third countries in exchange for which Lukoil would abandon its preemptive right to buy out a 50% stake in Turgai Petroleum.
The Chinese state company, however, failed to offer anything of interest, the spokesman said.
In September last year, Lukoil and CNPC signed a strategic cooperation agreement, signaling a warming of relations between the two companies following an arbitration over Turgai Petroleum.
In 2006, CNPC swallowed an adverse ruling when an arbitration panel in Stockholm upheld the preemptive rights of Lukoil to buy half of Turgai Petroleum.
Lukoil had sued through the independent tribunal after PetroKazakhstan, its former partner in the joint venture, was bought in 2005 by CNPC, the parent company of Hong Kong-listed PetroChina Co. (PTR).
Kazakhstan's state owned oil company KazMunaiGas could dispute the deal as Kazakh legislation gives the country's government the right to acquire a stake in companies developing mineral deposits if one of the shareholders withdraws from the project.
"We have talked to KazMunaiGas and, as far as we know, they aren't against the deal," the Lukoil spokesman said.
KazMunaiGas declined to comment.
Analysts have said that Lukoil failing to agree terms with CNPC could complicate future joint projects between the companies, but the Lukoil spokesman said that the company at present doesn't have plans to expand in China.
At 1330 GMT, Lukoil shares were down 0.9% at $98.5 slightly outperforming the wider market.