The British oil and exploration production company, BG plc, has come unstuck with an ongoing dispute concerning VAT between Russia and Kazakhstan. Arguments over the taxation issues have raged since the Karachaganak oil and gas field in Kazakhstan was closed for maintenance operations back in the beginning of September.
The dispute is centred around the charging of VAT twice and before the oil field is allowed to re-open, the two governments of Kazakhstan and Russia - which imports 20 per cent of output - must reach an agreement over double taxation.
Karachaganak is a vital money spinner for BG: in 2000 it produced 18 million barrels of oil equivalent of crude oil and gas for BG and its three partners: ENI (Italy), Texaco (US), and Lukoil (Russia).
But the delay in re-opening the oil field is hurting BG which claimes that if production does not resume before the end of October it will miss its target to produce 3,000,000 barrels each day this year.
Chevron-Texaco has estimated that the field could be out of action for as long as next year's first quarter and analysts have said this could result in BG being 3 per cent to 4 per cent short of its targets which is likely to strike a blow against the BG's reputation and credibility.
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