BEIJING, Oct. 19 -- China National Petroleum Corp (CNPC), the nation's largest oil producer, yesterday said it had reached an agreement with Kazakhstan over the fate of Canadian-registered oil firm PetroKazakhstan.

    In order to get the Kazakhstan Government to agree to CNPC's purchase of PetroKazakhstan, the Chinese firm has agreed to sell State-owned KazMunaiGas part of the Canadian firm.

    "CNPC signed an agreement with KazMunaiGas last week," Liu Weijiang, a CNPC spokesman, yesterday told China Daily, declining to elaborate further.

    A source close to CNPC said the agreement could involve selling equity stakes of PetroKazakhstan to KazMunaiGas.

    Sources said the Beijing-based oil conglomerate has agreed to sell a US$1.4 billion stake in PetroKazakhstan to the Kazakhstan Government in a move to win support for the deal, originally scheduled to be closed by today.

    This reportedly amounts to a 33 per cent stake.

    Shareholders of PetroKazakhstan will vote on the acquisition today, and CNPC will then make an announcement, Liu told China Daily yesterday.

    CNPC in August said it had agreed to buy Calgary Canada-based PetroKazakhstan for US$4.18 billion, which produces about 12 per cent of the crude output from Kazakhstan.

    The central Asian country, which receives 80 per cent of its income from oil, has plans to triple crude output by 2015.

    If successful, the deal will be China's largest cross-border transaction.

    China last year produced 174 million tons of crude oil, and imported 122 million tons.

    Kazakh President Nursultan Nazarbayev last Saturday agreed to a change in the law that will let his government bodies interfere sales of oil and gas companies, according to a Reuters report.

    Kazakhstan had said it opposed the CNPC takeover because PetroKazakhstan did not inform it about the deal and because the government wanted to secure control over some of PetroKazakhstan's assets. These include the Shymkent oil refinery, one of three oil processing plants based in the central Asian country.

    CNPC started its overseas expansion activities more than 10 years ago, and Kazakhstan is the oil giant's second biggest overseas market following Sudan.

    China and Kazakhstan are building a 3,000-kilometre pipeline, costing US$3 billion, to pump crude oil to China across the Central Asian state, with the first-phase of the project to be completed by the end of this year.

    PetroChina, the Hong Kong-listed subsidiary of CNPC, has said that during the first three quarters of this year, it saw a total output of 722 million barrels of oil equivalent, an increase of 5.3 percent year-on-year.

    In the first three quarters, PetroChina's average realized price of crude oil reached US$47.35 per barrel, 50.08 per cent higher than a year ago.

(Source: China Daily)