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TotalFinaElf to buy Statoil's Kazakhstan holding


LONDON�French energy giant TotalFinaElf SA Monday said it would buy Statoil AS's 4.76% share of the potentially large Kashagan oil discovery off Kazakhstan, making it the largest shareholder in the development.

Should the deal be finalized, TotalFinaElf would have a 28.6% interest in the Offshore Kazakhstan International Operating Co. (OKIOC) consortium exploring in the Kazakhstan sector of the Caspian Sea.

A spokesman said although the deal was still preliminary, enlarging its holding in Kazakhstan, and specifically the "very promising" Kashagan development, was "in keeping with TotalFinaElf's strategic plans" for the region.

TotalFinaElf has been in Kazakhstan since 1993 when it inked a deal with the Caspian Sea Consortium to conduct geophysical surveys offshore. The company last week bought BP PLC's 9.5% holding in OKIOC, a stake some analysts at the time calculated to be worth around $400 million.

Statoil Regional Vice-Pres. for the Caspian Rolf Magne Larsen said the agreement with TotalFinaElf accorded with its international upstream strategy of "focusing personnel and resources on core assets and areas with operator potential.

"Even with the huge discovery, the position on Kashagan does not meet our criteria for maturity and governance," emphasized Larsen, "because our ownership interest is too small."

Larsen added that the divestment of its OKIOC holding did not change Statoil's strategy for the region.

"The Caspian remains a principal priority area for us," he said.

Determining the size of the Kashagan discovery has been difficult, but reserves estimates range from 25�60 billion bbl. A second exploration well was spudded last October, and appraisal should take place early this summer.

Partners in OKIOC are Agip SpA, BG PLC, ExxonMobil Corp., Royal Dutch/Shell Group, Phillips Petroleum Co., and Inpex Masela Ltd.

Last October TotalFinaElf was chosen by the Kazakhstan government to undertake a feasibility study for a "southern route" pipeline to transport oil from Kashagan field via Turkmenistan to Iran. The proposed export line, the Kazakh Turkmen Iran Oil Pipeline, would cost $1.6 billion to construct and would carry 500,000 b/d to refineries in northern Iran. Capacity could be raised to 1 million b/d at a cost of a further $500 million. TotalFinaElf had no progress update on this study.

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