role in the world's largest ever oil deal which will generate $230 billion over the next 40 years.

The deal between the former Soviet republic Kazakhstan and US oil giant Chevron was announced last Thursday at a press conference held in Kazakhstan's capital Alma Ata. The formal agreement will be signed in Washington, DC on May 18 when Kazakhstan president Mr. Nursultan Nazarbaev makes his first state visit since Kazakhstan went independent.

The announcement represented the culmination of four years of negotiations that at several times were on the verge of collapse. The deal is significant for it will provide more than $80 billion in net revenue to the newly independent republic that stretches from the Caspian Sea to China.

"We are pleased that after long discussions we've reached this breakthrough,'' said Chevron chairman and CEO Mr. Kenneth T. Derr from Chevron headquarters in San Francisco. "We look forward to getting started and to having a long and successful relationship with our Kazakh partners.'' Under terms of the joint venture, the government of Kazakhstan will receive 80 percent of net revenues from the Tengiz and Korolev oil fields, considered among the richest in the world. Chevron will get the remaining 20 percent.

A western oil company was brought in due to the high degree of difficulty in extracting oil from the Tengiz and Korolev fields characterised by high pressure and toxicity. Western technology and investment was also needed.

The final terms of the agreement were vastly different to what had been originally negotiated in Moscow by what was then the USSR government. As late as last July the Tengiz deal was fiercely attacked by the Soviet press which claimed Chevron would reap huge profits at Kazakhstan's expense.

But late last year the government of Kazakhstan retained the services of three consultants -- the banking firm J.P. Morgan, London law firm Slaughter & May, and the Sultanate of Oman through Bermuda-based OOC Ltd. -- to negotiate a better deal.

Leading oil trader Mr. John Deuss is president of OOC Ltd., and while he yesterday declined to discuss his role in the negotiations, it is believed he was critical in finally bringing both parties together in a deal that was extraordinarily difficult to complete.

Discussions were particularly sensitive, not just because of the size of the transaction, but also because of language and cultural barriers. There was also pressure that any final deal had to be considered favourable for Kazakhstan which is in desperate need for western investment.

Kazakhstan's deputy prime minister Kalyk Abdullaev visited Bermuda earlier this year following a trip to Jackson Hole, Wyoming where he met with Chevron chairman Mr. Derr to try and improve in an informal atmosphere the relationship between the Kazakhs and Chevron. The two sides at that time were at an impasse because of a breakdown in communications and negotiating efficiency.

Subsequent meetings were held in London in March between the two parties and Oman, represented by OOC Ltd. It was at this point that Kazakhstan "requested Oman to conduct detailed consultations on its behalf with the Chevron Corporation'', said Oman's Ministry of Petroleum and Minerals in a written statement issued from Muscat yesterday.

"These consultations after seven different meetings between Chevron and Oman on the one side and Kazakhstan and Oman on the other side over the period March 20 to May 7 resolved on a step-by-step basis the differences between the parties on financial, technical, legal, regulatory, and commercial terms culminating in the signing of the Principles of Cooperation on creation of the Kazakhstan/Chevron joint venture.'' This agreement was reached through so-called `shuttle diplomacy' with OOC Ltd.

officers flying between San Francisco, Houston, Paris, and Alma Ata in an effort to develop terms acceptable to both parties. Attending the signing in Washington later this month will be US Secretary of State James Baker and Treasury Secretary Nicholas Brady. Also attending will be the sultan of Oman Said Bin Ahmed Al Shanfari and Mr. Deuss.

The Tengiz deal is considered historic for many reasons, and not just because of its magnitude.

Observers yesterday said it demonstrated Kazakhstan's ability to do business with the western world, which is eager yet cautious in negotiating with the former Soviet republics.

"This newly-formed republic, despite its lack of experience, got a better deal than the former Soviet Union would have obtained under the old Communist system,'' said one oil industry source familiar with the deal.

"The western world looks at the new republics with a great deal of suspicion.

Will they be stable, will they honour their previous commitments? Kazakhstan recognised that the correct thing to do was recognise the prior history of the transaction and continue with Chevron.

"This element is important, because it shows the right kind of attitude, and makes the right impression on the oil industry by sticking with Chevron. And they did a deal which was good for both parties.

"This should give a lot of encouragement to people who want to extend credit facilities to the republics to enable them to develop their resources.

"What this also does, and this is not to be overlooked, is that the worst thing you can do is just hand over money to spend on non revenue-generating investments. It is better to hand it over in return for well-defined revenue-generating investments to enable them to continue to generate revenue, which will form part of the economic engine to power growth.

"The other interesting thing is that Kazakstan solicited the assistance of three consultants, including the well-know J.P. Morgan and Slaughter & May, but it was the Sultanate of Oman, which was able to put this whole deal together without the involvement of the other two consultants.'' Oman's role in the Tengiz deal underscores its growing influence and reputation in the world oil industry. It was Oman which was the first oil producer to introduce market related pricing in the 1980s. And it was Oman's initiative that created IPEC (International Producing Exporting Countries), a parallel organisation to OPEC.

Before the 1980s Oman was a relatively small oil producing nation with an output of less than 300,000 barrels per day. Today it produces 725,000 barrels per day, and has emerged as a highly respected oil producing country.

Under the financial terms of the agreement, Chevron will acquire a 50 percent interest in the joint venture to be created between Kazakhstan and Chevron to which the Tengiz and Korolev fields will be contributed against purchase price payments and bonuses with Chevron essentially providing for the funding of all capital costs of the field development and processing facilities until the joint venture becomes self-funding.

"The Sultanate of Oman considers that the terms and conditions of the transaction between the Republic of Kazakhstan and Chevron Corporation are fair and equitable judged by world standards and represent a proper distribution of the balance of interests between the parties,'' said Oman's Ministry of Petroleum and Minerals yesterday.

"Tengiz will generate revenue to Kazakhstan over the 40-year life of the project of $80 billion including taxes and royalty. The joint venture's investments in field development and processing facilities is estimated to be $20 billion.

"The revenues of the transaction will make a very significant contribution toward the overall economic and social well-being and the welfare of the people of the Kazakh SSR.'' Located in western Kazakhstan on the northeast corner of the Caspian Sea, the Tengiz field was discovered in 1979, and the Korolev field discovered in 1986.

The Tengiz field was put on production in 1991 and is currently producing at a rate of 60,000 barrels of oil per day. The Korolev field is scheduled to come on production in 1999.

Both fields will produce from pre-salt, Paleozoic carbonate reservoirs. The Tengiz field is divided by depth into an upper reservoir from 4,000 to 4,700 metres and a lower reservoir from 4,700 to 5,400 metres. The field covers 565 square kilometres and the approximate gross pay sections are 300 metres in the upper reservoir and 1,000 metres in the lower reservoir.

The reservoir had an initial pressure in excess of 11,000 psi and produces 46 degree API gravity crude oil.

Combined recoverable reserves for Tengiz and Korolev range from 10-15 billion barrels with combined oil in place estimated at 33-40 billion barrels. This `super giant' is twice the size of the Prudhoe Bay in Alaska.

Production is projected to increase from present rates of 60,000 barrels a day to a maximum rate of 775,000 barrels over a 15-year period.

OOC's Mr. John Deuss.