Shell likely to win Kazakh oil exploration rights

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By Michael Steen

ALMATY (Reuters) - Royal Dutch Shell Plc is likely to win oil exploration rights to the Nursultan block in the south of the Kazakh sector of the Caspian Sea after winning political backing, the Dutch Foreign Ministry said on Friday.

"Things are looking good now and we expect the deal to go ahead," Herman van Gelderen, spokesman for Dutch Foreign Minister Bernard Bot, said after talks between Bot and Kazakh President Nursultan Nazarbayev on Thursday.

"But of course things still have to be finalised between Shell and its counterparts in Kazakhstan."

A source at Kazakh state oil and gas firm KazMunaiGas told Reuters that Kazakhstan planned to sign a production sharing agreement (PSA) on Nursultan by the end of May, but did not say whether Shell was in the deal.

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"We plan to sign the PSA before the end of May. We can’t announce any other details," the source said.

A Shell spokesman in London said: "We can confirm that we’ve been in discussion with the Kazakh state oil company (KazMunaiGas) about the Nursultan field in the Caspian and we’re pleased with progress at this stage."

Nazarbayev’s backing is crucial for major projects in Kazakhstan. He has ruled the ex-Soviet Central Asian state since 1989, overseeing rapid growth in its oil sector and economy but drawing criticism from non-governmental organisations for tolerating little political opposition and failing to root out corruption.

The Nursultan block is seen as attractive as it is in relatively deep waters near Kuryk, where there are plans to build a port.

Shell’s industry-lagging record at finding oil and gas have been a major concern for investors. It said on Thursday that tight markets for oil services and supplies would make it less likely that the company would achieve its 100 percent reserve replacement target over the 2004-2008 period.

An estimate printed three years ago in Kazakhstanskaya Pravda, a state-owned newspaper, put hydrocarbon reserves at 349 million tonnes at Nursultan, citing figures from KazMunaiGas.

Shell is already a consortium member in the Eni-led giant Kashagan field in the Caspian, which is due to come onstream in 2008, and will help boost Kazakhstan into the top 10 oil producers in the next decade.

Shell’s London-listed "A" shares were barely changed at 18.67 pounds at 10:39 a.m. in line with a 0.1 percent rise in the DJ Stoxx European oil and gas sector index <.SXEP>.

(Additional reporting by Raushan Nurshayeva in Astana, David Cullen in London)

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