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Tuesday, May 23, 2006

Kazakhs Will Hike Gas Price by 33%

KazakhstanTuesday, May 23, 2006 - Bloomberg, AP, Reuters - Kazakhstan has agreed to raise the price of natural gas its supplies to Gazprom by 33 percent, a move that may help to increase output at a field developed by BG Group, Eni and their partners. Kazakhstan agreed to raise the rate to about $60 per 1,000 cubic meters from $45, said Kanatbai Ibagarov, a deputy head of the gas department at the Kazakh Energy Ministry. The agreement was reached Saturday following a meeting between President Vladimir Putin and Kazakh leader Nursultan Nazarbayev. The fuel is supplied to a Gazprom refinery by Karachaganak Petroleum Operating, which is managed by Britain's BG and an oil unit of Italy's Eni. The price agreement, which the two sides struggled to reach, may lead to higher gas output this year. LUKoil, which holds a 15 percent share of the Karachaganak project, expects the partners to approve an increase in production of up to 24 billion cubic meters of gas per year. The new rate will match the prices of gas supplied by other Central Asian countries, Ibagarov said Monday. "It would be better for Kazakhstan to pay for the gas transit and sell the gas independently to consumers, but Russia is not interested in that," he said. The price hike appeared far smaller than that reported Monday in Kommersant, which cited sources close to the negotiations as saying that Russia had agreed to pay $140 per thousand cubic meters. A spokesman for Gazprom was unable to comment immediately on the report. Apparently referring to steps that would partly offset the price hike, Kommersant quoted Gazprom's deputy CEO, Alexander Ryazanov, as saying that the cost of gas for Ukraine would rise as of July 1 from $110 to $130 per 1,000 cubic meters. In January, Russia and Ukraine reached an agreement under which Ukraine would buy wholesale gas from Russia and Central Asia at a blended price of $95 per 1,000 cubic meters.

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