Archive for January 17th, 2008
Resolution in Kashagan Standoff a Win-Win Situation (At Least Now)
A long running dispute between a consortium of Western oil companies and the Kazakh government over Kashagan, a huge offshore oil development project in Kazakhstan, seems to have ended in an amicable resolution on Sunday night. The consortium has agreed to pay a fine of $2.5 billion to $4.5 billion, and let KazMunaiGas, the Kazakh national oil company, to increase its stake in the project to be equal to that of the four largest partners in the consortium. This is a welcome development for both the consortium and the Kazakh authorities. However, it could also turn out to be the start of a push to renegotiate all big oil contracts signed in the 1990’s.
Background:
On Sunday night, the consortium of foreign companies consisting of Eni (the operator of the field), ExxonMobil, Shell, Total, ConocoPhillips and Inpex, has reached an agreement with the Kazakh authorities and the Kazakh national oil company KazMunaiGas in a long-running dispute over the future of the Kashagan field.
Under the deal, the consortium has agreed to pay additional royalties to the Kazakh government of $2.5 billion to $4.5 billion over the life of the Production Sharing Agreement (PSA). These royalties are tied to the projected prices of oil with $65 per barrel on the low end and $85 on the high end and will start flowing in once commercial production begins.
Additionally, the partners have agreed to allow KazMunaiGas, the Kazakh national oil company to increase its stake to 16.8 percent. This will put it at par with the four largest shareholders (Eni, ExxonMobil, Shell, Total). The price tag for this acquisition was reportedly $1.78 billion. While this sum is, according to analysts, about half the fair market value of the stake, international observers largely see this deal as better than expected for the international oil companies.
The companies and the Kazakh authorities also agreed to alter the operating structure of the project. Eni, the sole operator until now, will relinquish its role as soon as the first development phase of the project is completed and commercial production starts. At that point, the operatorship will be divided among the five companies with the largest stakes in the project. According to Kazakhstan’s Minister of Energy and Mineral resources Sauat Mynbayev, KazMunaiGas will take on a leading role in providing a strategic direction while the foreign companies will split the actual development work.
Additionally, Mynbayev announced that the favorable tax regime which was a part of the original PSA will be revised.
News Roundup - January 17, 2008
Radio Free Europe / Radio Liberty: President’s Former Son-In-Law Sentenced To 20 Years In Jail
Rakhat Aliev was once one of the most powerful and influential people in oil-rich Kazakhstan. But after an Almaty court ruling late on January 15, he’s now a fugitive from the law…
United Press International: Prison term for Kazakh leader’s son-in-law
The former son-in-law of Kazakh President Nursultan Nazarbayev, now in Austria, has been sentenced in absentia to 20 years in a Kazakh prison. Rakhat Aliyev was convicted of a long list of charges, including kidnapping two managers of a bank he controlled…
Interfax: Miners in Kazakhstan go on strike
Miners from the Tentek coalmine belonging to Arcelor Mittal Temirtau in the Karaganda region of Kazakhstan started a strike on Wednesday morning. The strikers demanded the improvement of working conditions and a salary raise…
Forbes: World Bank provides 117.7 mln usd loan to Kazakhstan for health sector reform
The World Bank said it has approved a 117.7 mln usd loan for the Kazakhstan Health Sector Technology Transfer and Institutional Reform Project, which will help introduce international standards and build long-term institutional capacity in the ministry of health and related healthcare institutions…
Itar-Tass: Kazakhstan agrees to Protons’ launches in 1st quarter of the year
Kazakhstan’s government has agreed to launches of Proton boosters from the Baikonur space center in the first quarter of the year, Deputy Emergency Situations Minister of Kazakhstan, Valery Petrov, told a session of the Kazakh parliament’s lower house on Wednesday…
CNN Money: Eni CEO sees Kashagan daily output at 370,000 barrels in 2012-2013 - analysts
Eni SpA (NYSE:E) chief executive Paolo Scaroni said in a conference call yesterday that production at Kashagan is expected to reach 370,000 barrels of oil equivalent per day in 2012-2013, when the first phase of the oil field’s development will be concluded, analysts said…
Energy Commissioner, Andris Piebalgs, has welcomed today the fact that an agreement has been reached between the members of the Kashagan consortium and the authorities of Kazakhstan. The resolution of this dispute will allow the development of the Kashagan oil field to proceed at the quickest pace possible…
Motely Fool: The Kazakhs’ crush on Eni
Italian oil company Eni (NYSE: E) and its partners have finally reached an agreement with government officials in Kazakhstan that will permit a continuation of efforts to start the flow of oil production from that country’s huge Kashagan field…
Neweurasia.net: Painful life of Uzbek migrant workers
It is not a secret any more that a great part of male population of Uzbekistan, mainly from rural areas, annually leave their homes and families and travel mostly to Russia and Kazakhstan in search of money for living. All are driven by the same factor - financial…
Reuters: Kazakh’s CenterCredit denies acquisition rumours
CenterCredit CCBN.KZ, Kazakhstan’s No. 6 bank, on Wednesday denied market rumours that it was being taken over by a large foreign player, which had sparked a rally in its share price…
Reuters: Major energy pipelines in central/south Europe
ASPIAN PIPELINE CONSORTIUM (CPC) - connects Kazakhstan’s Caspian Sea oil deposits with Russia’s Black Sea port of Novorossiisk. Oil loaded at Novorossiisk is then taken by tanker to world markets…
Interfax: France’s Vicat acquires 60% stake in Kazakh cement plant project
France’s Vicat Group has acquired a 60% stake from Kazkommerts Invest in a project to build a plant called PK Mynaral Cement Invest at the Mynaral limestone field in southern Kazakhstan’s Zhambyl region…
Reuters: KazAgroFinance plans $200 mln eurobond in 2008
Kazakhstan’s state leasing company KazAgroFinance plans to issue around $200 million in eurobonds in 2008, the company’s chairman said on Wednesday…
Reuters: Kazakhstan 5-yr CDS hit record high
The cost of insuring Kazakhstan against default hit a record high on Wednesday amid a global sell-off of high-risk assets on worries about a U.S. recession…
