Archive for January 22nd, 2008
Kashagan: A Strange Victory
Interesting analysis by Dosym Satpaev, director of the Almaty-based Risk Assessment Group. The original article in Russian can be found here.
Last week, a long dispute between the Kazakh government and the Agip KCO consortium of Western oil companies came to an end. Our officials made the foreign investors an offer they could not to refuse.
As a result, KazMunaiGaz, the national oil company, increased its share in the Kashagan project from 8.33 percent to 16.81 percent. In addition, the participants discussed a $5 billion payment as a compensation for lost profits due to cost overruns and significant delays in commercial production.
All this was hailed as another great success in the government’s pursuit of public interest. But it is a strange “victory” considering that we have heroically solved problems that we brought upon ourselves in the 1990-s when hydrocarbon deposits were distributed like hot pastries at much lower prices than those that we are paying now. It has been announced that KazMunaiGas is going to pay $1.78 billion to increase its share in the consortium. That is no small sum, even if not paid at once but in three tranches once production begins.
All this would look great, if it was not for fact that in autumn 1998, Kazahstankaspishelf, the state oil company (representing the interests of the state), sold for $500 million its stake in the Kashagan project to Japanese Indonesia Petroleum (Inpex) and American Phillips Petroleum Co (7.14 percent each). Even at that time, there was discussion about the appropriateness of the transaction. And that did not only concern the low price (especially compared to $1.78 billion) but also the loss of a strategic asset. Especially since a few years after this sale, Kazakhstan paid BG, a partner who decided to exit the project in 2003, nearly $600 billion for an 8.33 percent stake in the same project. And now they are willing to pay $1.78 billion. Of course, it can be argued that the dollar devalued and the cost of the project increased. But so far, nobody has explained why there was such a hurry to sell Kazakhstan’s stake in the Kashagan project in the first place. Moreover, it’s still unclear where the $500 million went.
Ii is debatable whether all this can be called a “victory” if, in addition to strange math at the expense of national interests, nothing has been accomplished. It also should not be forgotten that the budget of the Kashagan project rose from $57 billion to $ 136 billion. Therefore, joining the new operating company, KazMunaiGaz will be required to invest heavily into the project along with the other larger investors.
Moreover, the Kashagan conflict revealed another more serious problem. Despite our ambitions to join the world’s top five exporters of oil and gas, Kazakhstan controls only 12 to 15% of its recoverable reserves of minerals. The rest, unfortunately, belongs to foreign investors. So, now we may have won one battle, but lost the entire war.
News Roundup - January 22, 2008
Money Morning: Kazakhstan squeezes the last drop out of Eni
Under the terms of a new agreement Eni S.p.A (E), the Italian oil company, will cede its control over operations at the Kashagan oil field in Kazakhstan. Kazakhstan’s state oil company, KazMunayGaz, will pay $1.78 billion to double its stake in the project from 8.33% to 16.81%…
Reuters: Kazakhstan bank assets grow 32 percent in 2007
Kazakh banks’ aggregate asset growth slowed to 31.7 percent in 2007 from almost 100 percent in 2006 due to the global liquidity squeeze, the country’s financial regulator said on Monday…
Wall Street Journal: The Caspian moment
The Caspian is back on the international energy agenda. Our region, rich in oil and gas, is emerging from the Soviet past with a bang. But we still have unfinished business. Regional integration is a priority for Azerbaijan…
Gazeta.KZ: Kashagan agreement will help lessen political risks on the project - Fitch Ratings
Fitch Ratings stated that the agreement signed between Kazakhstani government and the consortium developing Kashagan oil field headed by Eni Spa (”AA-” rating/ forecast “Stable”) should help to lessen political risks about the project…
Kazakh Government adopted a law ‘On ratification of the Agreement between the Governments of the Republic of Kazakhstan and Russian Federation on cooperation in the development of an economic entity on the base of Orenburg Gas Processing Plant’…
TREND: Kazakhstan Temirjoli to increase railway prices
The company Kazakhstan Temirjoli require Government support to increase railway service tariffs by 15%. Jaksibek Kulekev, the head of the Kazakhstan Temirjoli said in a meeting of the Ministry of Transport and Communication held with the participation of the prime minister Kerim Mesimov…
The Oil and the Glory: Horelma! Horelma Peramam! Stand up and be counted
Only, who is Horelma? I’m no slouch on Kazakhstan wealth, and I’ve never heard that name. Neither have any of a multitude of friends who have emailed asking about this fellow. A Google search pulls up 2,800 listings. All of them about this land sale…
Times Online: Sale of ‘Top Whack Mansion’ is £50m record
Toprak Mansion on The Bishop’s Avenue, Barnet, sold last week for £50m, breaking a record for a newly built property which was set only two weeks ago by a nearby house called Palladio, which was sold for £35m. The name of the Toprak purchaser was given as Horelma Peramam, a billionaire from Kazakhstan…
Forbes: Poland’s Petrolinvest plans output at minimum of 5,600 bpd by end-2008
Polish oil exploration venture Petrolinvest plans to produce at least 5,600 barrels of oil per day from deposits in Kazakhstan, the company’s chief executive said, supporting its shares on a battered Warsaw equity market…
Neweurasia.net: Potential water wars
Where may we see the wars for water in Central Asia?
1. Kazakhstan vs. China – Ili river;
2. Turkmenistan vs. Uzbekistan – Amu Darya river;
3. Possibly a row of collisions can happen in the basins of Syr Darya and Chu rivers; Kazakhstan vs. Uzbekistan – at Shardara, and Kazakhstan vs. Kyrgyzstan – for Shu river waters…
The rivalry situation is deteriorating in the oil sea transportation market in the Caspian Sea, Marat Ormanov, the Director General of Kazmortransflot, said to Trend Capital in Astana on 21 January…
Eurasian Home Analytical Resources: Eurasian Economic Community - new phase of integration
The Eurasian Economic Community, set up in October 2000, constitutes an absolutely new integrationist formation with a clear-cut and up-to-date development concept. Its member states pursue economic integration as the primary goal in their relations. Economic integration undergoes 3 stages: a free trade zone, followed by a customs union and finally an integrated economic zone.
Financial Times: Arcelor Mittal in talks over Kazakh safety fears
ArcelorMittal, the world’s biggest steelmaker, is meeting trade union representatives on Tuesday in Brussels to address health and safety concerns in the wake of a recent accident in the company’s Kazakhstan operations that killed 30 people…
