Kazakhstan: Lining Up More Ducks

In case the point were not yet ultra-clear, Kazakhstan wants to make it so – it is deadly serious about getting its way on the supergiant Kashagan oilfield.


Kazakhstan wants cash and effective control of the field -- the largest discovery of the last three decades -- and is in discussions with the Italian-led consortium developing it.

As of now, Kazakhstan has suspended new work on the field for three months. Italian Prime Minister Romano Prodi plans to visit Kazakhstan early next month on a charm offensive.

But given the current state of the industry -- with the demand curve on oil far exceeding expected supply, and Western oil majors locked out of most oil-exporting countries -- Kazakhstan one way or the other will probably get close to what it seeks. The companies will request, and may be able to obtain, some concrete assurance that whatever new deal is set will not be a wedge for an ongoing series of ever-tougher demands down the road.

The Caspian republic’s latest communication of its posture is a law making its way through the rubber-stamp Parliament.

The Wall Street Journal on-line has a piece on the topic today. Here are the first two paragraphs: A proposed law that would allow the Kazakh government to annul natural-resources contracts appears aimed at pressuring Kashagan oil developers led by the Eni SpA amid tense negotiations, rather than as a broad-based threat to energy and mining companies, analysts and a person familiar with the matter said. The proposed amendment, which would give the Kazakh government the right to pull out of natural-resources contracts if there is a threat to national security and economic interests, is expected to be adopted in the next two weeks, lawmaker Valeriy Kotovich said. Read story

The assurance that the law is deal-specific -- meaning only for Kashagan -- cannot be regarded seriously. A renegotiation of terms on Kashagan is bound to whet Kazakhstan's appetite. Russia has led the way in this more assertive attitude. Look for future demands for better terms at both the supergiant Tengiz and Kashagan fields.