Kazakhstan Places Moratorium on Oil License Sales
The new government of Kazakhstan, appointed this month, has begun regulating the oil petroleum sector of the economy by amending the law “On Mineral Wealth” to impose a two-year moratorium on reselling licenses to develop oil deposits. This pause in the country's rapid development of its petroleum production is intended to curb the spread of Chinese companies in the country's oil sector. New Minister of Power and Mineral Resources Baktykozha Izmukhambetov called the step necessary to allow the authorities to take closer control over the industry.
There has been a boom in license reselling in Kazakhstan since the middle of 2005. Many Western, mainly Canadian, companies sold their licenses to the Chinese companies CNPC and CITIC. CNPC took over the assets of PetroKazakhstan and CITIC received control of the Canadian company Nations Energy, which is developing the Karazhanbas deposit. CNPC and CITIC received their assets with the direct participation of Kazakh authorities in the deals. Russian companies, mainly LUKOIL, helped them raise the prices on those assets by making unexpected bids for them at the height of the negotiations. That technique worked twice in 2005, and both CNPC and CITIC were forced to agree to Kazakh conditions. Nonetheless, Izmukhambetov specifically mentioned Chinese companies when talking about the need for greater state control.
Last year, the Kazakh Ministry of Power and Mineral Resources predicted that oil production would not grow and the sector would stagnate. The cause is to a great degree the acquisition of Kazakh deposits by Western companies to increase their reserves. But difficulties in the Kazakh investment climate have made large companies, such as Chevron, willing only to invest in super-large projects. The new amendments, which were signed by Kazakh President Nursultan Nazabaev on January 15, will encourage license-holders to make investments in real production.
Nonetheless, Izmukhambetov predicts that production would pick up only in 2009, which the Agip KCO consortium, headed by Eni, is to begin production at the Kashagan deposit.
www.kommersant.com
All the Article in Russian as of Jan. 22, 2007
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