EBRD says dialogue key to sharing Kazakh oil riches

Central Asia’s biggest oil producer has alarmed foreign investors over past months by threatening to impose sanctions on a Western consortium developing the huge Kashagan field. Kazakhstan has also introduced an unpopular oil export duty and announced plans to increase taxes in the energy sector. EBRD head Jean Lemierre told Reuters in the Kazakh oil city of Atyrau he believed there was no reason for investors to worry. “This is a normal process,” he said in an interview. “In a country, which is rich with resources there is always an important discussion about how to share the upside.”

Lemierre, who steps down as EBRD president next month, was in Kazakhstan to attend the Foreign Investors Council, a dialogue body set up by President Nursultan Nazarbayev to discuss government policies with foreign companies. Global oil majors have invested billions of dollars into Kazakhstan’s oil and gas sector, helping the ex-Soviet state to more than double crude output since it gained independence. Kazakhstan hopes to attract even more money to double that figure again to about 150 million tons a year within the next decade and become one of the world’s top 10 oil producers. But analysts say the government is unhappy with the terms of the contracts signed in the 1990s and is trying to secure a bigger share of the revenues at a time of booming oil prices.

But Lemierre said disputes in the energy sector would not harm broader investment climate in a country also rich in metals, uranium and other natural resources. “I don’t see this as such as harming the investment climate because it has to do (only) with oil and gas and commodities,” he said. “In order to have a sustainable business environment you need to have a dialogue about how to achieve a fair distribution of the upside.”

Kazakhstan threatened last month to slap sanctions on Western companies developing the Kashagan oilfield, the biggest oil find in 30 years, should its operators decide to delay the start of production again. In another development, the government said investors, whose contracts have so far protected them from the oil duty and future tax increases may now need to seek separate permission by parliament. Lemierre said it was reassuring that the Kazakh government and investors have managed to resolve all disputes in the past. “It’s always a compromise between the respect of contracts - the sanctity of contracts must always be respected -- and the legitimacy of contracts,” he said. (Reuters)