UPDATE 2-Kazakhstan state energy company steps closer to London flotation

(Corrects name of NC KMG CEO to Sauat Mynbayev in paragraph 8)

* KazMunaiGas offers to buy remaining shares at subsidiary

* Move (NasdaqGS: MOVE - news) seen as clearest signal for public offering

By Ron Bousso and David Sheppard

LONDON, July 25 (Reuters) - Kazakhstan's state-owned energy company KazMunaiGas moved towards a possible stock market flotation in London, confirming on Friday it had approached its majority-owned exploration company to buy its remaining shares.

Bringing the cash-rich exploration arm back into the state-owned group is widely seen by analysts as a move towards the eventual public listing or IPO of the national company, which operates some of the largest oil and gas fields in the world.

"It is no secret that an IPO has been previously considered," a source close to the company said. "This move, which will give the company a clearer strategic direction, should be seen in that context."

The share offering would likely take place in London, the source added.

KazMunaiGas (NC KMG) has "made a preliminary approach" to buy shares it does not own in KazMunaiGas Exploration Production (KMG EP) at a value of $18.50 per share, NC KMG said.

"Given the preliminary nature of discussions, there can be no certainty that an offer will be made nor as to the terms on which any such offer might be made," NC KMG added.

The share offer was at a 40.7 pct premium over the current value of KMG EP, excluding its cash pile estimated at $4.1 billion. The national energy company already holds a 63 percent stake in KMG EP.

RESTRUCTURING

NC KMG is undergoing a restructuring under chief executive Sauat Mynbayev. The company accounts for 27 percent of oil and 14 percent of gas production in Kazakhstan.

The national firm has been hampered by significant delays and huge cost overruns at the giant Kashagan offshore field, which it jointly owns and operates with a consortium of international energy majors including ENI (NYSE: E - news) , Exxon Mobil, Royal Dutch Shell, and France's Total (NYSE: TOT - news) .

Kazakhstan's national oil output has slowed as the project, which was halted just months after starting production last year, may not now restart until 2016.

KMG EP, which was spun off by the Kazakh national energy company in a 2006 public listing in Astana and London, produces more than 250,000 barrels per day of crude oil and sits on reserves of more than 1 billion barrels.

The company raised over $2 billion in its initial public offering (IPO). Its current market capitalisation is over $7.5 billion. At 1211 GMT, its share price was up 2.5 percent.

Any offer for KMG EP would not be subject to the UK City Code on Takeovers and Mergers, KMG EP said in a statement.

The central Asian country produced 1.64 million barrels per day of oil in 2013, according to the U.S. Energy Information Administration website. (Reporting by Ron Bousso and David Sheppard; Editing by David Holmes and Ruth Pitchford)