Kazakhstan Wants Equal Ownership Status at Kashagan

The news today in one of the world's great oil disputes is that Kazakhstan has made public a demand for an equal share in the supergiant Kashagan oilfield. Bloomberg reports that six of the field's seven partners have agreed.

Work at Kashagan, the world's largest oilfield discovery in the last few decades, has been suspended while Kazakhstan and an Italian-led foreign oil consortium settle their differences. Kazakhstan is upset that, in a period of $90-a-barrel-oil, the field will be at least five years late coming to market; in addition, costs are nearly double what was originally estimated, and Kazakhstan will have to wait several more more years for some profit until those costs are paid off.

It's been clear that the Kazakhs want more control over the field, plus more money, and earlier receipt of it. The announcement today, however, is the first concrete statement that the country expects a full share of the field. That would approximately double Kazakhstan's current 8.3% holding.

What wasn't said is the terms: Does Kazakhstan intend to pay for the share? If so, are they talking cash? And if they are, how will the price be decided? Or will the companies carry the Kazakh interest?

And who is the holdout on agreeing? Given its record, a solid guess would be Exxon Mobil, which previously said it would consent only if the country extends the contract beyond its current 40-year life.

Kazakhstan is unlikely to agree to that condition when the dispute revolves around fault on the part of the foreign companies.

Exxon, which like Total, Eni and Shell has 18.5% of Kashagan, still behaves as though it's in the driver's seat. But the final settlement -- according to Kazakhstan it will be tomorrow; the companies say it will be later this month -- is likely to reflect a much stronger position for Kazakhstan.

Photo: twoshortplanks
Rights: Creative Commons