BG soothes fears over Kazakhstan tax inquiry

BG, the oil and gas exploration group, yesterday shrugged off an investigation by the Kazakhstan government into alleged non-payment of taxes as a "routine" matter.

BG, the oil and gas exploration group, yesterday shrugged off an investigation by the Kazakhstan government into alleged non-payment of taxes as a "routine" matter.

Speaking as BG became the latest oil producer to benefit from soaring prices, posting a 16 per cent increase in second-quarter operating profits, Frank Chapman, the chief executive, said BG was in discussions with the country's tax authorities, as was "usual" in the these circumstances. "It is a routine business and really not exceptional in any sense," he added.

Kazakhstan is one of BG's most important regions, with the giant Karachaganak field expected to account for a fifth of the group's entire oil and gas production. The tax authorities there claim BG has underpaid duties by $5.5m (£3m) amid accusations that the company has been "smuggling" gas out of the country.

Mr Chapman said the situation was in no way comparable with that of Yukos in Russia, where the country's biggest oil producer has been brought to the brink of collapse by action to recover unpaid taxes.

He also denied that the tax probe was linked to the Kazakhstan government's decision to exercise its pre-emptive rights to take over BG's stake in the Kashaghan gas field for $1.23bn. BG had planned to sell its stake to its partners, who include Shell, Exxon-Mobil, Total and ENI, until the government stepped in.

Operating profits for the three months to the end of June rose from £299m to £348m - in line with analysts' forecasts - due to higher oil production and prices. Stripping out exchange rate movements and the benefit of higher oil prices, operating profit was up 1 per cent.

Mr Chapman forecast higher UK gas prices as the country became a net importer of gas from 2006. But he dismissed fears that Britain could run short of supplies.