(Press release) – Eni announces that the agreement signed in Astana on December 14, 2011 between the companies of the Karachaganak Petroleum Operating (KPO) consortium and the Kazakh Republic became effective today.

Under the terms of the agreement the Republic has acquired a 10% interest in the Karachaganak Final Production Sharing Agreement (FPSA) for $2.0 billion cash and $1.0 billion non-cash consideration (pre-tax) including the final and irrevocable settlement of all cost recovery claims. Tax of $1.0 billion is payable on the gain arising on the disposal. The Republic’s interest in the Karachaganak FPSA will be managed by the national oil company, KazMunaiGas (KMG).

This agreement marks the closure of all pending disputes between the parties, the entry of the Kazakh state company KazMunaiGaz, with a 10% stake issued pro rata by the current partners and KMG’s provision of the Caspian Pipeline Consortium (CPC) oil pipeline with the capacity to transport up to 2 million tons a year. The economic and financial terms that regulate the agreement are concurrent to those previously announced.

Completion of the agreement also provides for:

• exemption from export custom duties for the Karachaganak project until 2038, the remaining 26 years of the FPSA term; and
• final agreement on all tax and customs matters up to the end of 2009.

KazMunaiGaz’s entrance represents a significant step forward towards strengthening the cooperation between the parties involved in the consortium. In the interim the companies have already started preparatory activities to support future development of the field, which is expected to yield a substantial increase in current production of liquids and gas.

Karachaganak is a giant liquid and gas field with recoverable reserves of 5 bboe. In 2011, production at the Karachaganak field averaged 239 kbbl/d of liquids (64 net to Eni) and 784 mmcf/d of natural gas (231 net to Eni).