UPDATE 2-Petrolinvest pays $512 mln in Kazakh expansion

(Adds analyst comment, details)

By Marynia Kruk and Pawel Bernat

WARSAW, Jan 11 (Reuters) - Polish oil company Petrolinvest PROL.WA signed preliminary all-share deals worth $512 million to expand its presence in the potentially lucrative Kazakhstan oil market, sending shares up as much as 7 percent on Friday.

If completed, the preliminary deal will dilute the controlling stake of the controversial Polish tycoon Richard Krauze, who will see his holding fall to 30 percent from 49 percent.

But investors applauded the agreement, which they hope would entrench Petrolinvest's position in Kazakhstan to take advantage of its vast oil reserves, even as some foreign investors worry the central Asian state will tighten its grip on resources.

"The share issue will make them (the new shareholders) more loyal, thanks to which Petrolinvest will secure its position in difficult Kazakh conditions," said Kamil Kliszcz, an analyst at BRE Bank in Warsaw.

The highly speculative shares were up 3.9 percent to 318.50 zlotys by 1442 GMT, valuing the company at $770 million. Warsaw's large cap WIG20 .WIG20 index, was down 1 percent.

Petrolinvest signed letters of intent to pay $512 million in newly issued shares, priced at 320 zlotys each, to buy Capital Energy and increase its stakes in EmbaYugNeft and Occidental Resources Inc. to 100 and 98 percent, respectively.

It already owns 50 percent stakes in each.