Texaco Acquires 20% Stake in Kazakhstan Oil Field

Texaco Inc. on Tuesday took a 20% stake in an oil and natural gas field in Kazakhstan being developed by Italy’s ENI and Britain’s BG, a move that could expand Texaco’s reserves by about one-fifth.

Terms of the transaction, which Texaco says won’t produce returns for two or three years, were not disclosed. The project will require an investment of $10 billion over 40 years, the Energy Department estimated last year. That would put Texaco’s commitment at $2 billion.

Texaco said the field could be its largest single source of reserves, adding the equivalent of about 700 million barrels of oil to its holdings. On Monday, Texaco agreed to buy Monterey Resources Inc. of Bakersfield for $1.4 billion, a move the company said could add 385 million barrels of proven reserves.

“Within a period of 48 hours, Texaco has acquired the potential to put well over a billion barrels of reserves on its books,” said Eugene Nowak, an analyst with ABN AMRO Chicago Corp.

On Tuesday, Texaco shares gained $1.50 to close at $113 on the New York Stock Exchange.

The Kazakhstan project gives White Plains, N.Y.-based Texaco a source of profit that could last for decades, if it can overcome the political difficulties and risks of operating in former Soviet republics.

The Karachaganak field poses particularly sticky political problems because much of its worth is in its natural gas reserves. The only route for natural gas to Europe is a pipeline through Russia, but the country refuses to let outsiders use the pipeline because it wants to protect the monopoly of Gazprom, the state-run gas company that operates it. Gazprom once backed the project, but pulled out.

“Surrendering one’s market when there is a lack of sufficient capacity is, I believe, nothing less than a crime against Russia,” said Gazprom Chief Executive Rem Vyakhirev.

Texaco said the Karachaganak field contains about 2 billion barrels of oil reserves and 20 trillion cubic feet of natural gas. The developers plan to ship condensate, a highly prized liquid that refiners use much like high-quality crude oil, to Europe via a $2-billion pipeline that Chevron Corp. and several partners are building to the Black Sea.

Building pipelines between landlocked Kazakhstan and surrounding nations is difficult. Chevron’s Tengiz pipeline, for example, is to go through Chechnya, which has been torn by civil war and battles with Russia. Chevron and its partners are considering alternative routes.

The Monterey Resources purchase and the Karachaganak stake together will expand Texaco’s total reserves by more than 25%, Nowak said. At the end of 1996, Texaco said it had total reserves of 3.7 billion barrels of oil equivalent, which includes crude oil, natural gas and condensate.

Kazakhstan and the companies investing in Karachaganak haven’t yet reached an agreement on how to share the field’s output of natural gas and oil.