Kazakh prime minister sees solution for Chevron's Tengiz New Europe 14.10.2007
Kazakh Prime Minister Karim Massimov said on October 12 a row with the Chevron-led Tengizchevroil consortium over sulphur contamination at the Tengiz oilfield "is almost solved." He said Tengizchevroil should accept the Kazakh proposal and pay the Kazakh side for suitable storage facilities. "Sulphur is not an issue. We will find a solution/' Massimov told reporters in Astana on October 12. Asked by New Europe if environmental threats were just a negotiating technique in order for the Kazakhstan government to work out a better deal, the prime minister said this is not the first time that a company violates environmental regulations. This is not the first time. It's my personal quotation that instead of firing each and every time for sulphur issues, it's better to find a solution for this issue and we are negotiating. I think we are going to find a solution. It's a question of negotiation," Massimov said. Since July, Kazakhstan's environmental protection agency has sought to fine Tengizchevroil over sulphur storage.
Chevron Texaco former vice chairman of the board, Richard H. Matzke, told New Europe in Astana on October 12 sulphur is a unique problem coming from associated gas in the Tengiz and Kashagan oil fields. The situation parallels the problems companies had to face in west Canada. But he noted that Chevron paying a fine would not solve the environmental problem.
Matzke, who participated in the negotiations in the Chevron contract fifteen years go, said: UI don't think any of us understood the complexities of what we were about to get ourselves involved in." Oil companies are looking for a way to avoid having sulphur lying around on the ground or put gas into the atmosphere. "What Kazakh government is worried about is fixing some of the issues that were relatively unknown when some of these projects begun. The production of oil and gas in the Caspian is very complex, very difficult. Ten years ago, fifteen years ago when contracts were written, people didn't understand the complexities. I think from my conversations with Kazakh officials they would like to resolve some of the issues that now have become apparent," Matzke said.
"How to capture all of the gas that might otherwise not be brought in the economic system is one of the objectives. Finding some way to dispose of sulphur in a rational way, is clearly something that the companies, the Kazakh government and people that live in western Kazakhstan would like to do and I would hope that they would work cooperatively to meet a common goal. Everybody has the same goal and that is how to produce oil and gas in an environmentally sensitive way and in a commercial way," he said. "I think all the partners in Tengiz - Chevron and Exxon and KazMunaiGaz and LUKoil have done their very best to try to bring the latest technology to bear on a very, very difficult problem," Matzke said, who now works for LUKoil.
Despite the difficulties, US companies are willing to work in Kazakhstan. For major energy companies, the Caspian is a new "el Dorado" and that explains the different language the US uses when dealing with Kazakhstan compared to Russia.
"The Kazakh industry, as managed by the national oil company, is a growing industry and I think that the approach that other political entities will take to Kazakhstan and Russia are going to be completely different because the industries we are dealing with are so different," he said.
"The Russians achieved their success by themselves the first time around. Kazakhstan achieved its success with a lot of help from somebody else. I don't think it makes a lot of sense for foreigners to think that Russia is going to respond as an emerging country that never had any experience in producing oil and gas. It's not going to happen," Matzke said. He noted that foreign investors see more opportunities in Kazakhstan.
While speaking at the international conference titled: "Kazakhstan Strategy 2030: the Results of the First Decade and Prospects," Kazakh President Nursultan Nazarbayev said on October 12 Kazakhstan, as early as 2017, will feature "on the world's top ten list of hydrocarbon exporters and this position will further define the economic role to be played by Kazakhstan."
He noted that Kazakhstan has "avoided all kinds of Dutch diseases" and plans to ensure accelerated delivery of energy resources. Dutch disease describes the relationship between the exploitation of natural resources and a decline in the manufacturing sector. The theory is that an increase in revenues from natural resources will de-industrialise a nation's economy by raising the exchange rate, which makes developing the non-oil subsectors less competitive. Kairat N. Kelimbetov, chairman of JSC sustainable development fund Kazyna told New Europe on October 11 the Kazakhstan government, in an effort to reduce the country's exposure to price fluctuations for energy and commodities exports, created the National Oil Fund. He also noted that the government takes mostly preventive measures to avoid suffering from the Dutch disease.
"In Kazakhstan we have a situation where all the money goes to the raw materials or no-tradable subsectors of the oil economy like real estate or construction. If you have money in Kazakhstan what is the first think in your mind to develop in Kazakhstan? First, you can be part of some oil operation or trade in oil. Then, if you have no chance to be part of this, you start to think of some financial operation around oil and around the real estate and only as a last resort you start to think, let's do something in terms of industrialisation, in terms of IT development, etc,'" Kelimbetov said.
"These are some of the consequences of the Dutch disease, but it's not the striking damage in the local non-oil industry because actually the non-oil industry in Kazakhstan does not really still exist. That's why it is not damaged right now, but it could be damaged anyway in five or ten years when we start to create the non-oil subsectors," he said. Meanwhile, foreign companies are still looking for opportunities in the oil and gas sector of Kazakhstan. At a restaurant, just a stone's throw away from the headquarters of KazMunaiGaz in Astana, US businessmen were hailing a deal that would bring their companies in a successful marriage.
Author: Kostis Geropoulos 14 October 2007 - Issue : 751
