September 27, 2007
Kazakhstan steps up pressure on foreign oil companies
Kazakhstan is stepping up the pressure on foreign oil companies, with the parliament approving a bill that would give the state the power to strike out contracts for oil, gas and other resources. Politics in Kazakhstan being what they are, the bill seems certain to become law. (FT stories may require subscription.)
It raises the pressure on Eni and its partners at Kashagan, which are facing an October 22 deadline to settle the dispute over the projects’s costs and the distribution of revenues.
David Thomas of Citigroup, in a recent note, suggested the threat to kick out the Eni-led consortium was hollow.
"While the new law, if passed, would theoretically allow the Kazakh government to cancel the existing Kashagan production sharing agreement, we believe this would be highly unlikely since there are no viable options available to accelerate the technically complex and capitally intensive development of the giant Kashagan field," he wrote.
All the same, the mere possibility, however remote the threat is, will certainly concentrate minds at Eni and its partners.
The Wall Street Journal has a colourful story about MangistauMunaiGaz, or MMG, Kazakhstan’s fifth-largest oil producer. The company is worth $4bn-plus, the story suggests. But with the poltical climate worsening, and MMG’s ownership opaque, it would be a brave western company that took the plunge. The Chinese companies seem more likely bidders.
Meanwhile, the signs from neighbouring Turkmenistan are rather more positive, although it is still early days for most western majors.
