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. Last Updated: 07/27/2016

British Gas, Agip Enter Kazakh Deal

ALMATY, Kazakhstan -- British Gas and Italian oil group Agip signed an interim agreement Thursday to develop Kazakhstan's Karachaganak oil and gas field, one of the biggest in the world. Russia's giant natural-gas monopoly Gazprom, a vital link in ensuring access to European export markets, also joined in the deal, establishing the principles of production-sharing.

A final agreement on the 40-year project could be reached by the end of this year, company officials said.

British Gas and Agip will each have a 42.5 percent share. Gazprom will hold the remaining 15 percent.

Kazakh Prime Minister Akezhan Kazhegeldin said at the signing ceremony that a presidential decree and government resolution had been signed "granting this project a most favorable investment regime." He gave no further details.

Oil and Gas Minister Nurlan Balgimbayev said the project called for investment of $10 billion. Under the agreement, 85 percent of profits should go to Kazakhstan and the remaining 15 percent to the three contractors.

"We are now taking a time-out to determine the potential of the deposit, transport schemes and other issues," Balgimbayev said.

"The main thing is that an agreement has been signed," British Gas chief executive Cedric Brown said.

"The signing of this agreement here today will strengthen the efforts of negotiating teams and our technical experts who have been working towards this objective for the past three years," Agip chairman Guglielmo Moscato said.

"Gazprom worked on Kazakhstan in Soviet times and today we can talk about the second birth of Karachaganak," Gazprom deputy chairman Valery Remizov said.

The Karachaganak reservoir in northwest Kazakhstan was discovered in 1979 and came into limited production in 1982. Recoverable reserves are estimated at 1.33 trillion cubic meters of natural gas, 644 million tons of gas condensate and 189 million tons of crude oil.

Balgimbayev said the field declined after the collapse of the former Soviet Union in 1991 and Gazprom's departure.