Kazakh PM says investors behind oil disputes-INTERVIEW

Dec 1. Reuters. ASTANA

By Robin Paxton

* Says Kazakhstan will honour oil contracts
* Will renegotiate Kashagan deal only if output delayed
* Expects privatisations in 2011

Kazakh PM says investors behind oil disputes-INTERVIEWKazakhstan, seeking to boost oil output by 60 percent over the next decade, will not change contract terms with foreign oil majors unless investors fail to meet targets, the country’s prime minister said on Wednesday.

Karim Masimov said investors in Kazakhstan’s oil sector, the largest in Central Asia, were primarily responsible for various contractual disputes and that the country would seek to reopen talks on a massive oilfield development should production lag.

“Whatever disputes you may hear about from investors, it’s basically started by them. They are asking for some additional favours,” Masimov told Reuters.

“Kazakhstan is honouring our signature on all production sharing agreements,” he said. “Kazakhstan will never initiate ourself – we never did it in the past and we will never do it in the future – revising agreements.

Foreign oil executives say privately they are concerned about growing state influence in Kazakhstan’s lucrative energy sector and changes to the tax regime in a country with slightly over 3 percent of the world’s recoverable oil reserves.

Some officials have long urged the government to review production sharing agreements signed in the chaotic 1990s, when Kazakhstan – then short of hard currency – was more inclined to make concessions to lure foreign investors.

“When you sign a contract it’s a commitment from both sides. If one side, the government or investors, are asking for negotiations, there should be a reason. But we are not going to change basic principles.”

Kazakhstan aims to increase crude oil output to 100 million tonnes by 2015 and 130 million tonnes by 2020, from 81 million forecast for this year, the Oil and Gas Ministry says.

Key to this growth will be the massive Kashagan field, the world’s biggest oil discovery in more than four decades.

Cost overruns and assertive government policy opened the door for state oil and gas company KazMunaiGas to join the consortium of foreign investors that runs the field in 2008. The start of the complex project has repeatedly been delayed. “Kashagan investors have promised us that they will start oil delivery by 2012. If they do it, we have no objections, we will go ahead,” Masimov said. “If there are some problems, we will come to the table again.”

Kashagan is being developed by Eni, Total, Shell, ConocoPhillips, ExxonMobil and Inpex, as well as KazMunaiGas.


Masimov said Kazakhstan aimed next year to offer stakes in a number of state-owned companies. Any company under the umbrella of sovereign wealth fund Samruk-Kazyna would be a possible candidate for privatisation, he said.

Samruk-Kazyna manages $70 billion of assets, including KazMunaiGas, state rail company Kazakhstan Temir Zholy and majority stakes in several banks. It has said it will unveil its privatisation plan in January.

Masimov said: “2011 is a new time for privatisation.

“We want to do it transparently. We want to do it through the stock market, and we want the people of Kazakhstan to participate in the privatisation of the economy.”

Kazakhstan’s resource-dependent economy would grow by about 7 percent this year, Masimov said. “We strongly believe that we will have single-digit growth in the next few years,” he added.

Diversifying its economy is also a major target for Kazakhstan, a nation of 16 million people covering an area five times the size of France.

“In the next three to four years, there will be a lot of attempts by the government to diversify the economy,” Masimov said. “Infrastructure is the key. Railways, highways, electricity generation, power stations are the key priorities.”