/REUTERS, Michael Steen, April 21, 05/ - Kazakhstan's Energy Ministry has ordered Canada's PetroKazakhstan Inc. to cut oil and gas production below a level where no flaring takes place.

The ministry said in a statement on Thursday that it believed its rules were being regularly broken at PetroKazakhstan's Kumkol oilfield in central Kazakhstan, but it declined to say how production would be affected.

PetroKazakhstan, which aims to produce 170,000 barrels per day in 2005, said in a statement it had not received a copy of the ministry decision and was unable to fully assess the impact it would have on production.

The Kazakh ministry also accused the ChevronTexaco -led Tengizchevroil consortium of breaking rules governing oil extraction at its Tengiz and Korolevskoye fields in the west of the Central Asian state.

Tengizchevroil would be given six months to address its concerns, the ministry said. A spokesman for Tengizchevroil said his company had not received any notification of the decision from the ministry but expected to make a statement on Friday.

Gas flaring at Kazakh oilfields has in the past prompted rows between the state, citing environmental damage, and Western operators, who say they meet the most stringent standards.

Kazakhstan has introduced legislation to phase out gas flaring except in emergencies.

PetroKazakhstan said its fields would comply with "full gas utilisation" rules by July 1, 2006 and it had submitted the plan to regulators.

It also noted it had built a power plant at Kumkol to use gas and cut back on flaring and in 2004-2005 provided a $12 million subsidy to assist gas distribution to residents of Kyzylorda, south of Kumkol.

PetroKazakhstan, a medium-sized oil company based in Calgary, has been locked in a dispute with Russia's biggest oil producer LUKOIL over pricing at their 50-50 joint venture, Turgai Petroleum.

Turgai operates Kumkol North, while PetroKazakhstan operates Kumkol South itself. The Energy Ministry ruling covered both sets of oilfields.

LUKOIL accuses PetroKazakhstan of underpaying for crude supplies from Turgai and is seeking $100 million from PetroKazakhstan while PetroKazakhstan is claiming $265 million from LUKOIL, accusing the Russian firm of failing to fund Turgai's expansion and shutting down wells.

LUKOIL said last week a court had impounded PetroKazakhstan's stake in Turgai, a claim denied by the Canadian company. LUKOIL subsequently made public a copy of a Kazakh registrar's document confirming the stake seizure.

Two PetroKazakhstan officials have also been charged with breaking anti- monopoly laws, which the company says are unfounded and it has been fighting an antitrust case as owner of Kazakhstan's biggest oil refinery.

((Editing by James Jukwey; Reuters Messaging: michael.steen.reuters.com@reuters.net, almaty.newsroom@reuters.com; +7 3272 508 500))

[2005-04-21]