Those Clever Kazakhs…

There’s a very interesting piece by Paul Betts in the FT today about Kazakhstan’s skillfully shrewd strategies as a regional energy player: Given the experiences in Russia, the Kazakhs have woken up to the opportunities for renegotiation of the old contracts on a 38bn-barrel field and they appear determined to extract as much as they can from the western companies. They have not hesitated to use a dispute over rising development costs and production delays to threaten stripping Eni of its operational role. Hey! Look at Russia! If they can push around energy companies with no consequence, then why can’t we?! Call it a contagious case of resource nationalism. More excerpts after the cut…

From Paul Betts in the FT:

Kazakhstan has always been at the heart of “great game” politics. Back in the 19th century, the Russians, the British, the Germans and the French were already conspiring against each other for central Asia’s rich natural resources. After the second world war, a new player entered the game – the US. Ever since, the Americans have not been shy of moving every weapon in their arsenal to tighten their hold on the region’s energy assets.Exactly 10 years ago, Colin Powell, then US secretary of state, flew to Kazakhstan to lobby on behalf of ExxonMobil to become project operator of the biggest oil find since the discovery of Prudhoe Bay in Alaska in the 1960s. He was outmanoeuvred largely because the Kazakh government was reluctant to place so many assets in American hands. Chevron had stitched up the Tengizchevroil joint venture in another prospect. If ExxonMobil were awarded the operational role in the Kashagan offshore Caspian oil field, US oil majors would have ended up controlling more than 70 per cent of Kazakhstan’s future oil riches.Italy’s Eni was chosen instead as operator in what the Kazakhs hoped was a relatively independent compromise. For Eni, it was a huge break because the smaller state-controlled Italian oil group had never been awarded an operational role in such an important field. So Eni found itself in charge of a consortium with far larger companies such as ExxonMobil, Royal Dutch Shell and Total.It was always going to be a challenge for the Italians, given the complexities of developing the Kashagan offshore field. Yet, the recent jump in oil prices and the emergence of resource patriotism in oil-rich countries has made life even more difficult….The Kazakh government was originally due to decide by this Friday on the new conditions it wants to impose on the Kashagan consortium. But all this “great game” power playing is making it more likely that any decision will be postponed. The Kazakhs are aware that with the rivalries inside the western camp, they are likely to negotiate better terms if they wait.