/REUTERS, Almaty, Dmitriy Zhdannikov, October 4, 05/ - Kazakhstan wants "strategic control" over Canadian oil company PetroKazakhstan's assets and its state oil firm is in talks to obtain a stake in the firm, the energy minister said on Tuesday.

Such a move could complicate a $4.18 billion offer from China National Petroleum Corp. (CNPC) for PetroKazakhstan Inc., which has all of its assets in ex-Soviet Kazakhstan.

The Chinese bid, announced more than a month ago, has unsettled some Kazakh lawmakers who want a refinery owned by PetroKazakhstan brought back under state control.

"Whatever happens to the shares, the state company will have a stake, which would allow (us) to properly work in this direction," Energy and Mineral Resources Minister Vladimir Shkolnik told reporters at an oil and gas conference in Almaty.

"In any case, strategic control will stay within the country," he said. "This is a very serious issue, we're talking here about a strategic enterprise, upon which a huge southern region of our country is dependent."

Shkolnik said talks were under way but declined to specify with whom or to give any further details.

PetroKazakhstan produces 150,000 barrels per day but also owns the best of only three oil refineries in Kazakhstan, a vast landlocked Central Asian state bordering China and Russia.

The Canadian company has modernised the refinery at Shymkent but has frequently clashed with the government over its attempts to cap fuel prices during the harvest season.

ASSERTIVE

Kazakhstan has become increasingly assertive about state oil company KazMunaiGas playing a role in major projects and has demanded foreign companies pay a greater share of their local earnings back to the state.

Last month, parliament started considering an amendment to the subsoil laws which would impose greater state control over the sales of foreign-held stakes in the energy sector.

The Kazakh government used a similar change to the subsoil law last year as part of a battle to gain access for KazMunaiGas to the consortium developing the offshore Kashagan field.

British BG Group Plc's had sought to sell its share in the ENI-led consortium to most of the other consortium members, only to be blocked by the government and the change in law.

After months of negotiation, the state agreed to pay $600 million for half of BG's 16.67 percent stake.

The Chinese government has good relations with Kazakhstan and is helping to build a pipeline to the Chinese border that links up with existing lines serving PetroKazakhstan's Kumkol fields.

Shkolnik confirmed the first stage of the 962-km (600 mile) pipeline, Atasu- Alashankou, was on track for completion in December.

He also said the government had not yet held any talks with Russian oil major LUKOIL about its own $2 billion bid for Nelson Resources, another Canadian company with all its assets in Kazakhstan, announced last week.

[2005-10-04]