-Caveat Lector-
{{I am posting this only becuase ''sacred'' oil interest are at
stake. You know to what extremes this country will go to on behalf
of oil interests.
~Amelia~))
STRATFOR's
Chevron: At Risk in Kazakhstan
11 May 2001
Analysis
On April 25, the Kazakh government accused Tengizchevroil, a joint
venture extracting oil from the country's massive Tengiz field, of
various environmental offenses, according to InterfaxKazakhstan.
Since Kazakhstan's environmental laws are still embryonic in nature
and their enforcement lackadaisical, the accusations are probably an
effort to wring concessions out of Chevron, the joint venture's
operator and largest stakeholder. Astana's heavy-handed tactics bode
poorly for foreign investors.
The stakes are high. Tengiz is one of the world's largest oil
fields, with estimated reserves of 6 billion to 9 billion barrels.
The field is expected to produce enough petroleum to supply the bulk
of the Tengiz-Novorossiysk pipeline's 1.34 million barrels daily
capacity. The agreements that sealed the Tengizchevroil deal in 1993
are worth at least $20 billion.
Chevron, a U.S. company, should be concerned about the security of
its investment. Last May, Kazakhstan booted out another large
investor - Belgium's Tractebel - after disputes over the scope and
direction of its investments. The natural gas company refused to
play Kazakh President Nursultan Nazarbayev's political games, and it
was shown the door.
The allegations must be a particularly bitter pill for Chevron.
Tengizchevroil is Kazakhstan's premier oil project, accounting for
almost half of the country's total production. Chevron recently
acquired enough equity to secure a 50 percent ownership stake.
Tengizchevroil's corporate structure does little to protect foreign
investors, however. The Kazakh government controls 20 percent of the
venture, and thereby has a direct say in decision making.
Astana has another tool: the Russian firm LUKoil, which together
with British Petroleum owns a 5 percent stake in Tengizchevroil.
Kazakhstan has shown a willingness to transfer Western shares in
major Kazakh projects to Russian firms. Russian natural gas giant
Gazprom now controls what used to be Tractebel's Kazakh network.
If Chevron confronts the government, Astana can put pressure on the
Caspian Pipeline Consortium, which transports Tengiz oil to the
Black Sea. Astana controls 19 percent of CPC, a larger share than
Chevron's 14 percent. Astana also has an ally in the Russian
government, which holds a 24 percent stake in CPC. Russian firms
feature here as well, accounting for another 20 percent through
various joint ventures. All have a vested interest in maximizing
their ownership at the expense of Western firms.
Now that all the heavy lifting is done - Tengiz currently produces
nearly 300,000 barrels per day and the CPC pipeline is largely
completed - Astana has few qualms about pressuring the consortiums
into financial concessions. The government well knows that, in
league with Russian firms, it can operate the new infrastructure on
its own should Western partners prove unyielding.
For the Kazakhs, there is one catch. There are even bigger fish to
develop in Kazakhstan's sea of oil - the great white of which is the
Kashagan oil field. The Offshore Kazakhstan International Operating
Company (OKIOC), a consortium of nine multinational oil firms,
manages this behemoth's development. But Kashagan lies offshore and
is a deep, complex deposit that is as yet undeveloped. Kazakhstan
lacks the cash, personnel, experience and technology to exploit the
field by itself. If Astana leans too heavily on Chevron, it risks
scaring investors away from OKIOC and leaving Kashagan permanently
buried under three miles of earth and water.
Astana, however, seems willing to take a calculated risk. BP and
Chevron are the logical first targets. The UK-based BP, which has
limited exposure in Kazakhstan, has been divesting itself of onshore
oil investments, opting instead for natural gas or oil deposits
offshore. While Chevron is a larger regional player that has no
intension of surrendering its oil stakes, its activities focus on
Tengizchevroil and the CPC. Chevron has no involvement in OKIOC.
There is a possibility Astana can manipulate Chevron without unduly
disrupting investor interest in Kashagan.
Chevron will undoubtedly appeal to Washington for help, but there is
little Washington can do. Moscow holds all the cards in Kazakhstan,
while the United States has reduced its involvement in the region.
There would be other fallout as well. Non-American firms run most of
OKIOC; most are annoyed with the American members who, due to
Washington's investment restrictions on Iran, do not back the most
economically feasible export route. If Washington becomes too
recalcitrant, Chevron and ExxonMobil could find not only Astana and
Moscow arrayed against them, but Italy's ENI, Japan's Inpex, the
Netherlands' Shell and France's TotalFinaElf, as well.
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