Oil and Natural Gas Corporation (ONGC) has suffered a setback in its efforts to

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get 25 per cent stake in the prospective Satpayev oil field in the Caspian Sea after Kazakhstan backtracked on its commitment.

After three years of negotiations, Kazakhstan is now offering OVL, the overseas arm of ONGC, only an exploration contract for Satpayev wherein the Indian flagship will get a fixed fee for its efforts, industry sources said.

Kazakhstan had initially identified Satpayev and Makhambet blocks in the Caspian Sea for giving 50 per cent stake in one of them to OVL. Later it reduced the stake on offer to 25 per cent and conditioned the Indian flagship’s entry to it teaming up with steel baron Lakshmi N Mittal. OVL relented and in June 2007 made an attractive commercial proposal to KazMunaiGas, but in subsequent negotiations, the Kazakhstan's public-sector firm did not agree on the percentage of stake OVL would get. It also did not agree on operatorship to OVL during exploratory and appraisal stage. Sources said this year Kazak Parliament began discussing introduction of a new tax code and pending which a moratorium on all the ongoing negotiations was declared.

Kazakhstan has decided not to sign any Production Sharing Agreement (PSA), which entail firms getting a stake in oil and gas fields, and only exploration contracts would be signed. In case of commercial discovery, the contractor will have the first preference to sign PSA, they said.