Prime Minister Karim Masimov, speaking at a meeting with tax officials, said the new rule would apply only to newcomers, adding the government would remain committed to obligations stipulated in all existing production sharing agreements (PSAs). “For new contracts we ought to exclude production sharing agreements as a type of contract,” he said. “Kazakhstan will continue to fulfill its obligations for those contracts that have already been signed.” Kazakhstan has been toughening its energy policy over past years, alarming investors, who see its new-found assertiveness as part of the growing global trend of resource nationalism. “The government’s declaration is in line with the recent trend observed in oil-rich emerging market countries of taking a more assertive stance towards the ownership of oil revenues,” ING said in a research note.
Kazakhstan’s biggest oilfields such as Karachaganak and Kashagan are all being developed by Western oil majors and based on PSAs that provide the state with a portion of the output but fix their tax burden for the duration of the project. Tengiz, another key oilfield led by Chevron, is based on an alternative concession agreement which leaves all the output for the operator but allows the government to change tax levels over time.
New fields
Masimov did not describe a type of contract Kazakhstan wanted to use with oil and metals companies from now on. Officials have said in the past that Kazakhstan wants to switch to an all-concessions system after parliament passes a new tax code in the second half of 2008. New fields include Darkhan, with oil reserves estimated at 11 billion barrels and comparable to that of Kashagan, as well as Satpayev, with 1.85 billion barrels in reserves and Isatai with 1.75 billion barrels.
Analysts say most outstanding fields, while substantial in reserves, are less attractive to investors due to their remote location or difficult geology. Others said the nation’s willingness to leave current contracts intact was a sign of a more balanced policy. “The most positive moment in this situation is that the government representative (Masimov) officially stated the intention to fulfill obligations in existing contracts which is a sign of a favorable investment climate in the country,” UniCredit brokerage wrote in a note.
Masimov also said taxes should be increased for subsoil companies but reduced for firms operating outside the subsoil sector — a move the government believes would help spur small and mid-size businesses and diversify the economy. (Reuters)
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