Kazakhstan to tie up with Shell for Kashagan oil

By Maria Golovnina

ALMATY (Reuters) - Kazakhstan said on Friday state oil company KazMunaiGas would create a joint venture with Royal Dutch Shell (RDSa.L) to handle the production segment of the Kashagan oilfield.

"A joint venture between Shell and KazMunaiGas is being formed so that KazMunaiGas could take the lead in the production sector of the project," the government said on its website, government.kz.

Energy Minister Sauat Mynbayev said KazMunaiGas would take over production-related operations at Kashagan in five years and join its new operational structure, according to the government.

KazMunaiGas said earlier this year that Western companies developing the Kashagan oilfield would all get new roles after the completion of the project's initial development stage.

Kazakhstan and a group of global oil majors, at odds over Kashagan's production schedule and costs, are due to finalise details of the project's future development by October 25.

KazMunaiGas is at the centre of state plans to exert more control over its resources following the first post-Soviet decade when Kazakhstan, its economy in tatters, lured foreign investors with tax breaks and sky-high returns.

"KazMunaiGas will be also part of a new operational model which is being created in the project," the government said, reiterating an earlier agreement.

It did not elaborate and officials were unavailable to clarify the scheme. Shell was also not available for comment.