Kazakhstan Reassures US Oil Producers Over New Sanctions

Kazakhstan H1 Oil, Gas Condensate Output Up 9.7 Pct

US oil producers have been given assurances that their projects in Kazakhstan will not be
affected by the new round of sanctions against Moscow, easing fears in the energy industry that
the broad restrictions will not hit investments with indirect links to Russia.

President Donald Trump last week reluctantly signed into law fresh sanctions against Russia in
retaliation for Moscow’s alleged interference in the US election despite concerns from energy
companies that the broad scope of the curbs — which include a ban on financing Russian energy
export pipelines — could cause unintended damage to some investments.

Chevron and Exxon Mobil hold stakes in Kazakhstan’s Tengiz oilfield, in which the two
companies agreed a $37bn investment last year. Oil from the field is exported through Russia to
the Black Sea via a pipeline owned by the Caspian Pipeline Consortium (CPC).

“The pipeline, which links our oil to the seas, in particular to Novorossiysk, is not covered by the
sanctions,” said Kazakhstan’s minister of national economy, Timur Suleimenov.

“American companies, such as Chevron, who are also shareholders of the CPC, have themselves
obtained from their parliament such [information] that transit pipelines be excluded from
sanctions,” he added. “Therefore, in this case, the delivery of our oil to foreign markets will not
be affected.

Chevron, which owns 50 per cent of the Tengiz project, declined to comment on Mr
Suleimenov’s remarks but said: “At this time, we do not believe the new Russia sanctions
legislation has a material impact on existing Chevron operations in Eurasia or its partnerships.
We continue to monitor developments regarding the legislation. Chevron abides by a stringent
code of business ethics, under which we comply with all current applicable laws and
regulations.”

An official at the Office of Foreign Assets Control, which oversees US sanctions compliance, said
it does not comment publicly on the specific application of sanctions to private scenarios or on
potential individual licenses.

Exxon, Kazakhstan’s state-run oil company KazMunaiGas and Russia’s Lukoil also hold stakes
in the Tengiz field. Italy’s Eni, France’s Total, Exxon and Royal Dutch Shell own shares in
Kashagan, another large Kazakh oilfield that also exports crude along the CPC pipeline.
As well as crossing some 1,000km of Russian territory, the CPC pipeline is 31 per cent owned by
the Russian state. Two sanctioned Russian companies, Rosneft and Lukoil, hold stakes.
When the sanctions bill was first proposed in Congress, some industry experts warned that US
companies using CPC may have needed a presidential waiver to comply.

While Russia’s important energy industry has been one of the main focuses of western sanctions
imposed since 2014, after the country’s invasion and annexation of Crimea, the decision to bring
in targeted sanctions against companies financing or supporting Russian energy export
pipelines was taken primarily to target Gazprom’s Nord Stream 2 gas pipeline.

Nord Stream 2, which is under construction and will run under the Baltic Sea to Germany, is
being partially funded by EU energy companies Shell, Engie, Wintershall, Uniper and OMV.

Additional reporting by Ed Crooks in New York and Katrina Manson in Washington

This article was originally published on THE FINANCIAL TIMES. Read the original article.

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