Kazakh Officials Refute Charges They Mistreat Foreign Investors

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07.10.2010 22:13

10_1_m.jpgKazakh officials are unrepentant about their dubious treatment of foreign investors in the oil and gas sector so far this year and insist they have a pragmatic, common-sense approach to conflict resolution.

Speaking at the KAZENERGY Eurasian Forum in Astana — one of two high-profile energy conferences in Kazakhstan last week — Oil and Gas Minister Sauat Mynbayev admitted the abrupt reintroduction and planned doubling of the duty on crude oil exports would “increase uncertainties,” but said production sharing agreements (PSAs) have not been touched (IOD Sep.1,p8). Kanatbek Safinov, executive secretary of the ministry, agreed that the laws have only been changed within the framework of existing legislation and existing contracts. “There has been an increase in contract terminations, but we are ready to go to arbitration to resolve these issues,” Safinov said. “Sometimes in the past, investors behaved quite freely and the public bodies did not react. It became inevitable that the laws were infringed. If complaints are made by the public bodies, there are grounds for that. We are always ready to listen to justified arguments,” Safinov added. But government pressure on the predominantly foreign-operated Karachaganak and Tengiz projects in the past 12 months drew criticism from Daniel Stein, senior advisor to  Washington’s special envoy for Eurasian energy, Richard Morningstar. “It is a concern because Kazakhstan has had such a good reputation,” Stein told reporters. Conflict resolution should be carried out through “good-faith negotiations,” not public accusations and intrusive investigations, he said. Both Karachaganak Petroleum Operating Co. (KPO) and Tengizchevroil have been accused by the Kazakh authorities of making illegal revenues from overproduction. Both deny the claims. The Kazakhs are still locked in negotiations with KPO over the export duty, which the BG and Eni-led consortium says it should not have to pay, as the Kazakhs look to seal their entry into the project. Government officials appeared tired of — and reluctant to talk about — the long-running Karachaganak saga, with Mynbayev insisting the sides are not debating the size of the stake Kazakhstan will acquire, but merely “how to improve the work of the project.” “I’m convinced that we have now reached a mutual understanding,” he said. Mynbayev said the Kazakhs have, however, come to an agreement on the export duty with Chevron-led TCO — which counts Kazakh state Kazmunaigas among its shareholders — whereby the consortium does not lose any money. TCO, which has paid some $42.2 billion to Kazakhstan since its formation in 1993, has a history of resolving flare-ups with the government fairly favorably. Stein told International Oil Daily that the US government had not lobbied on behalf of Chevron and Exxon Mobil — which has a 25% stake in Tengiz — to reach a deal over the duty. Speaking more broadly, powerful Kazmunaigas Chairman Timur Kulibayev noted that “not all the nuances in negotiations can be publicized,” adding that a degree of “commercial secrecy” needs to be preserved.


Tom Daly