Astana’s Brinksmanship: MangistauMunayGaz’s Lessons of Petrocracy

As noted in Energy Daily, Kazakh Prime Minister Karim Masimov recently disclosed that he had sanctioned KazMunayGaz’s planned purchase of a major stake of MangistauMunayGaz, a move that would give the state-owned oil company shareholder veto power over company decisions, further diluting the power of Western investors. What this consolidation will mean both for the Kazakh oil patch and other international projects is something to watch closely in the months ahead.  It is just the latest example of an emerging oil power asserting its nationalistic control over significant hydrocarbon projects.  As the article reports:

“…In 2006, it [MangistauMunayGaz ] extracted nearly 5.7 million tons of oil, which it projects will rise to 5.8 million tons by the end of the current year. The company reportedly controls reserves totaling 500 million barrels. Prior to Masimov’s announcement, Jakarta’s Central Asia Petroleum Ltd. owned 99 percent of all outstanding ordinary shares of MangistauMunayGaz.

…In the ensuing chaos of the Aliyev affair, according to a report in the Almaty Vremiia, Western companies expressed an interest in acquiring MangistauMunayGaz. Masimov’s announcement makes it clear however that the Kazakh government intends to acquire a dominant position in the company.

…Record-high oil prices have given MangistauMunayGaz a balance sheet that would cause drooling among the most hardened Wall Street investors, with a September reported quarterly profit margin of 50.36 percent. The Mangistau region accounts for approximately 27 percent of Kazakhstan’s hard currency earnings from energy exports.

…The MangistauMunayGaz affair is indicative of a larger trend among former Soviet countries to reassert increasing control over their energy resources following contracts signed in the immediate aftermath of the 1991 collapse of communism, when a desperate search for Western investment led many nations to sign production joint venture agreements that have increasingly come to be regarded as unfair and exploitative. The rising petro-states of Kazkahstan and Azerbaijan have followed the lead of Russian President Vladimir Putin, who most notably moved against the oligarch Mikhail Khodorkovskii and his Yukos oil company four years ago.

For Kazakhstan, the largest prize is its offshore Kashagan Caspian field, the largest oil field discovered in the last 30 years with potential reserves estimated to be as high as 70 billion barrels with a projected daily output is projected of more than 500,000 barrels per day. Italy’s ENI is operator of the project; under terms of the production sharing agreement, KazMunayGas and Inpex hold an 8.33 percent share each in Kashagan; ENI, Total, ExxonMobil and Shell have 18.52 percent stakes apiece while ConocoPhillips holds a 9.26 percent share. Plagued by cost overruns and delays, the Kazakh government has been attempting to renegotiate the PSA to give KazMunayGas a larger percentage of the project, causing enormous unrest among its Western partners….”

This entry was posted on Tuesday, December 11th, 2007 at 7:50 am and is filed under Kazakhstan, KazMunaiGas.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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