BP to Sell Kashagan Stake to Total

ALMATY, Kazakhstan Ч Oil supermajor British Petroleum said Friday it had agreed to sell its stake in Kazakhstan's giant Kashagan oil field to France's TotalFinaElf.

BP said agreement had been reached in principle but declined to put a value on the deal. Analysts said BP's share of the giant Caspian Sea find could be worth upward of $400 million.

"We can confirm that we are in negotiations with BP to buy their stake. This is in line with our policy to strengthen our position in the project," a TotalFinaElf spokesman said in Paris.

BP will sell the 9.5 percent it owns in the Offshore Kazakhstan International Operating Company consortium, which is exploring Kashagan.

"This sale could have been expected. TotalFinaElf had earlier announced its desire to become the operator of Kashagan, and now it has a real chance of success," a senior Kazakh government official said by telephone from the capital, Astana.

Several other OKIOC members are keen to win operatorship of the prized multibillion barrel field, one of the world's biggest untapped petroleum reserves.

The Kazakh government source said that in recent months top officials from TotalFinaElf and other OKIOC members Agip and ExxonMobil had held talks with President Nursultan Nazarbayev to discuss the operatorship.

Nazarbayev last month called on OKIOC to elect one of its members as operator without delay.

BP is selling the stake because it was unable to secure a large enough share in the field to influence the project.

"The intention is to try and finalize this agreement by the end of February," said a BP spokesman in Moscow.

"There are many other partners and most of them have bigger interest than we do. Our interest does not give us any real influence or decision-making ability. So it's difficult for us to have a significant influence on the project, and nobody wanted to sell, so we did not have another option."

Earlier last week BP sold the 7 percent stake in Russia's LUKoil that it inherited when it purchased U.S. major Atlantic Richfield.

TotalFinaElf, which already owned 14.3 percent of OKIOC, will become the Kazakh consortium's largest holder with 23.8 percent.

The venture also includes BG PLC, Royal Dutch/Shell, ExxonMobil and Agip Ч each with 14.3 percent Ч Phillips Petroleum and Japan-based Inpex with 7.14 percent each and Norway's Statoil with 4.8 percent.

Those partners have preemptive rights that mean they could outbid Total for the stake.

Feverish speculation over the size of Kashagan has been met by stony silence from OKIOC but oil industry observers expect commercially viable reserves of at least 10 billion barrels.

OKIOC discovered oil in its first test well on Kashagan last July. It is now drilling a second test well and will start appraisal drilling in May or June.

First oil, if OKIOC decides to develop the field, is not expected to flow for several years.