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Chinese President Xi Jinping, on his recent tour of Central Asia, has managed to secure a deal with Kazakhstan to buy a stake in its giant Kashagan oil field.
The Kashagan, located in the Caspian Sea, is the world’s largest discovery in 50 years and China will receive an 8.33 percent stake from Kazakhstan for $5 billion.
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President Xi Jinping of China and President Nursultan Nazarbayev of Kazakhstan. (CCTV.com)
The agreement was signed by the heads of Kazakhstan’s state owned oil and gas company, KazMunaiGas, and China’s state owned oil company, China National Petroleum Corp. (CNPC), with the two presidents standing by and witnessing the act.
After agreeing the deal with Kazakh President Nursultan Nazarbayev, President Xi announced that “the two countries have agreed on China's shareholding in the development of the Kashagan deposit,” and that “the two governments hail and support this agreement.”
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During his visit Xi has managed to organise 22 oil and gas deals worth around $30 billion, including the construction of an oil refinery in Kazakhstan.
Kazakhstan contains three percent of the world’s recoverable oil reserves, and the Kashagan field, along with neighbouring fields in the North Caspian Sea, hold an estimated 35 billion barrels of oil.
Reuters claim that CNPC will also pay $3 billion to finance half of the phase two of Kashagan’s development, expected to begin in 2020. The China Development Bank and The Export-Import Bank of China, will also guarantee loans of $3 billion and $5 billion respectively, to Baiterek, Kazakhstan’s state-owned holding firm.
Next on his tour of Central Asia, President Xi will visit Kazakhstan’s neighbour Turkmenistan, in order to discuss deals that will secure natural gas supplies, and potentially build a pipeline to China.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com