AKIPRESS.COM - Kazakhstan's $1.6 billion dispute with oil majors developing the Karachaganak gas condensate field may escalate to arbitration if negotiations on the matter fall through, Kazakh Energy Minister Kanat Bozumbayev told Reuterson Wednesday.

Bozumbayev said his ministry was also preparing for "heated negotiations" on the giant Kashagan project, expected to begin commercial output between October and December and produce up to 1 million tonnes of oil this year.

"It is a routine dispute, (but) if we fail to reach a final agreement, there will be arbitration," Bozumbayev said in an interview, referring to Karachaganak.

"We want everything to be fair up until 2037 from our point of view," he said. A production-sharing agreement (PSA) on the project will expire in 2037.

Russia's Lukoil said last month Kazakhstan had filed a $1.6 billion claim against the PSA consortium led by BG Group and Eni. The energy ministry, in turn, has said the dispute was about calculations of the parties' shares in the field's output.

Eni and BG, recently acquired by Royal Dutch Shell Plc , each own 29.25 percent of the Karachaganak project in northwest Kazakhstan, which they jointly operate. Kazakh state-owned KazMunayGaz owns 10 percent, Chevron Corp 18 percent and Lukoil 13.5 percent.

Bozumbayev said Kazakhstan had no plans to revise the Karachaganak PSA because it would hurt the investment climate.

"This is a perfect project, we do not need to change anything there, only to defend our position under the PSA," he said.

Separately, Kazakhstan and its partners are also discussing additional investments aimed at maintaining the field's production levels for a longer period.

"We are interested in the most efficient solution: lower investment, longer period when output is maintained at the current level," Bozumbayev said.