China and Kazakhstan may sign $10b accord for oil

China, the world`s second-biggest energy consumer, may agree next week on lending $10 billion to Kazakhstan in return for the right to take a stake in an oil producer in the Central Asian country.

China National Petroleum Corp. plans to buy a minority holding in AO Mangistaumunaigas from state-run KazMunaiGaz National Co., a China National official said Saturday. The two nations may sign an accord on April 15 when Kazakh President Nursultan Nazarbayev visits Beijing, the official said, declining to be identified because of internal rules.

China should tap its $1.95 trillion in currency reserves to help domestic companies buy overseas exploration rights, Zheng Xinli, a deputy director at the policy research office of the ruling Communist Party, said in March. The nation`s oil imports climbed to a one-year high in March, according to customs data.

"China has always sought control of its energy businesses because this is an essential commodity," said Ong Eng Tong, a Singapore-based consultant with Hamburg-based oil trader Mabanaft Gmbh. "It makes sense to acquire assets now because it`s cheaper than when buying during the boom years."

Crude oil in New York is down almost $100 a barrel from the record $147.27 reached in July, closing at $52.24 yesterday.

Kazakhstan, the biggest energy producer in the former Soviet Union after Russia, is spending 2.2 trillion tenge ($14.6 billion), or 14 percent of gross domestic product, to prevent the first economic contraction in a decade.

The central Asian nation is seeking $10 billion in Chinese investments, while talks are under way with China`s biggest oil company on the sale of a stake, Energy Minister Sauat Mynbayev said on April 6.

A KazMunaiGaz official, who asked not to be identified, declined to comment.

Kazakhstan received an estimated $21.1 billion in exploration and production investment last year, a 19 percent increase on 2007, Mynbayev said in January. It holds 3.2 percent of the world`s proven oil reserves, according to BP Plc. Chevron Corp., BG Group Plc, Eni SpA and OAO Lukoil are among other foreign investors in the country`s oil and gas industry.

China is seeking to bolster oil supplies from Kazakhstan, the China National official said.

Russia, which agreed in February to supply China with oil for 20 years in return for $25 billion in credit, is in discussions with the country for additional loans for natural gas supplies, the official said, without giving details.

Nazarbayev will visit Beijing before attending the Boao Forum, a regional economic summit held on the southern Chinese island of Hainan. (Bloomberg)