China and Kazakhstan are closing in on a deal that would see the latter in receipt of a loan worth $10 billion from the State Development Bank of China, in exchange for increased access to oil assets in the Central Asian Nation, for the former.
Negotiations between CNPC, China National petroleum Corporation – a state oil company, and KazMunaiGas, Kazakhstan’s national equivalent – are ongoing over a joint venture agreement to develop the nation’s oilfields. If agreed the venture would be put into practice by MangistauMunaiGas, in which KazMuniaGas already owns a 50% stake.
If signed the agreement would involve CNPC taking a 49% stake in MangistauMunaiGas, which is reported to be sat on oil reserves amassing around 500 million barrels, in the oil-rich region. Its residual oil reserves are calculated to be 812 million tons, while its extractable reserves stand at 194 million tons.
The two nations are expected to sign the loan-for-oil agreement later this week during Kazakh President Nursultan Nazarbayev’s visit to China.
In recent weeks stated owned energy companies from both Russia and India have also been eying deals with the Kazakh Government for access to the resources.
The news comes as the latest development in a clear programme for China – the world’s second biggest consumer of oil – as it has signed a series of similar agreements in recent months with oil producers from Venezuela, Brazil, and Russia. In a clear move to boost its energy securities, and in turn reduce its overseas reliance China is currently seeking long-term deals with neighbouring nation states, and is using its huge foreign reserve to do so. The long-term pipeline deal agreement signed with Russia, back in February, is believed to be worth $25 billion.
On Tuesday, President Nazarbayev publicly called for closer ties between his country and China, to extend upon existing cooperation in the energy field. The Kazakhstan-China oil pipeline is already in operation, and a natural gas pipeline running between the two countries is currently under construction.
China imported around 6 million tons of oil through the Kazakhstan-China pipeline in 2008 – up by 26% from the previous year. Following the anticipated completion of the third section for the line later this year, China expects to see an increase in capacity to 20 million tons of oil flowing through the pipeline per annum, by 2020.