"Negotiations" Kazakh style
The newest entrant in the worldwide let's-sabotage-our-oilfields sweepstakes is Kazakhstan. The news from there is ludicrous enough to merit a Borat sequel.
Foreign investors developing one of the world's biggest oil fields could see their stakes in the venture whittled down as Kazakhstan pushes to expand the state oil company's role in the project.
Kazakhstan's energy minister, Sauat Mynbayev, said in an interview that the government is negotiating a bigger stake for state energy giant JSC NC KazMunaiGaz in the consortium developing Kashagan, a Caspian Sea oil field that is the world's largest outside the Middle East.
Indeed, depending on how you measure these things, Kashagan is the only major oil find since Alaska and the North Sea in the 1960s. Understandable perhaps that the national oil company wants a bigger piece of the action. But they've got to come up with a better excuse than this to justify looting the Western majors developing Kashagan:
Mr. Mynbayev said that massive cost overruns and delays at Kashagan had harmed Kazakhstan and that increasing KazMunaiGaz's presence was one way to undo the damage. A bigger stake would give Kazakhstan greater control over costs, he said.
Does Mr. Mynbayev really think JSC NC KazMunaiGaz (full name "JSC NC KazMunaiGaz for Betterment of Kazakh Peoples LLC BFD") can do a more cost-effective job of developing Kashagan than Italy's Eni, France's Total, Royal Dutch Shell, or any of the other majors that have a hand in the project?
The dispute over Kashagan, which was the biggest oil find in 30 years when it was discovered in 2000, erupted this year when Eni announced a big budget increase and production delays. Kazakhstan threatened to fire Eni as operator, and it demanded billions of dollars in compensation. Kazakhstan's Parliament then passed a law allowing the government to break oil contracts deemed to be a threat to national security.
A deadline for a solution expired yesterday, but the sides agreed to keep talking and signed a memorandum of understanding setting out principles for the next stage of negotiations, Mr. Mynbayev said.
We all know where this is going — down the same road to socialism (or crony capitalism) that Hugo Chavez and Vladimir Putin have followed. As a result, Kashagan may never reach its full productive potential — and oil's worldwide supply-demand imbalance will get further out of whack.
Oh well. At least the Kazakhs still have their potassium.