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Kazakhstan: Official Reassures Western Oil Companies

  • Michael Lelyveld

A leading authority on the Kazakh energy sector says that foreign oil companies should not be troubled by moves to centralize control over oil exports. In fact, former Energy Minister Nurlan Kapparov argues, the measures are needed to increase exports and are not aimed at creating a monopoly to raise tariffs.

Boston, 28 September 2001 (RFE/RL) -- According to a leading energy adviser to Prime Minister Qasymzhomart Tokaev, Western oil companies in Kazakhstan should have no concerns about the country's export system, which many view as a new monopoly.

Nurlan Kapparov, a former energy minister who has also headed national oil and pipeline companies in Kazakhstan, said the government's decision to impose a "unified routing system" for oil exports earlier this year was made largely for "technical" reasons.

Under the system, foreign oil firms must channel all of their oil exports through the national pipeline company KazTransoil before they can enter Russian pipelines for shipment outside the CIS.

Oil company representatives have complained privately that the system allows the powerful Kazakh company to raise export tariffs at will, essentially creating a second monopoly in addition to the Russian network for exports.

In March, ambassadors from the United States and 11 other countries voiced objections to the unified routing requirement in a letter to Prime Minister Tokaev, the "Oil Daily" reported.

The ambassadors stated, "Most importantly, the involuntary nature of participation in the Unified Routing System would interfere with the rights to freedom of marketing and freedom of transportation that are crucial elements of the production-sharing agreements signed by the companies with Kazakhstan."

Foreign oil companies have come under pressure to sign long-term contracts that would give KazTransoil the right to handle all exports for the next five years, the "Oil Daily" said.

But Kapparov, currently an energy adviser to the prime minister, said during an appearance at Harvard University's Kennedy School of Government that tariffs had remained unchanged under the system, which he characterized as "more useful for the companies."

The unified routing had solved communication problems with the Russian pipeline company Transneft, allowing the country to increase its oil exports through Russia's network, he said.

In his previous posts, Kapparov has headed both KazTransoil and the national oil company KazakhOil.

In response to a question from RFE/RL, Kapparov also said that a government decision in August to take control of KazakhOil's 20 percent share in the country's giant TengizChevroil project was due to a "technical" rather than a policy consideration.

In August, the Transcaspian Project news service quoted an unnamed KazakhOil representative as saying that the transfer "would provide for better regulation of relations between the government and the company." The move caused Moody's Investors Service, a Wall Street bond-rating agency, to place KazakhOil under review for a possible downgrading of its debt.

But Kapparov said the shift was prompted only by the start of a $2 billion expansion program at the TengizChevroil joint venture, which has been Kazakhstan's largest oil development so far.

The project will require a "cash call" for capital from the joint-venture partners. Kazakhstan's contribution will now come directly from the Ministry of Finance, he said. In the future, the shares may be transferred back to KazakhOil, Kapparov suggested.

Kazakhstan's oil policy has been subject to increasing scrutiny as the country stands on the brink of becoming one of the world's major oil-producing countries.

Government officials predict that Kazakhstan could pump 6 million to 7 million barrels of oil per day by 2020, rivaling Saudi Arabia. A boost in production is expected after the opening of the Caspian Pipeline Consortium export route to the Russian port of Novorossiysk on the Black Sea, now tentatively set for October.

But concerns have also been raised concerning the efforts of Kazakhstan's politically connected groups to control oil profits. Government officials have dismissed these concerns, arguing that greater control is needed to further the economic development of Kazakhstan.