Publication: Monitor Volume: 4 Issue: 87

At Euroforum’s 29-30 April “Kazakhstan Oil and Gas” conference in London, top Western oil and gas extraction and service companies praised Kazakhstan’s investment opportunities and legislative environment. Privately, however, they were less enthusiastic about the country’s frequent government reshuffles.

Foreign investors concurred that Kazakhstan’s oil and gas reserves are immense. Official Kazakhstani estimates claim, as reserves, 7.8 million tons of expected land recoverable oil, another 1.3 billion tons from Kazakhstan’s sector of the Caspian shelf and 7.1 trillion cubic meters of natural gas. Chevron predicted that its joint venture operation, Tengizchevroil, will be producing 240,000 barrels of oil per day by the year 2000. The company has put $600 million in the project and plans a further $16 billion over the next three years. The European Bank for Reconstruction and Development (EBRD) encouraged further investment, highlighting its recent loan to Ispat-Karmet. (See the Monitor, April 23) It also announced an imminent loan of $200 million to the Belgian utilities company Tractebel. Most foreign companies surveyed informally by the Monitor agreed that the four key foreign oil and gas investment laws — on Foreign Investment, Subsoil Use, Oil and Taxation — had all improved significantly in recent years.

The main obstacle to foreign investment remains: a lack of confidence in policy continuity as top officials are frequently reshuffled. The recent changes of senior personnel in the oil and power industries illustrate this concern. (See the Monitor, April 22) Foreign businessmen told the Monitor that they regretted the departure of Baltabek Kuandikov, the former head of Kazakhoil who had been in his post only since last autumn. One international service company said frequent government changes mean that officials often refuse to take responsibility for earlier decisions. Other observers concurred that the reshuffling since February reflects both President Nursultan Nazarbaev’s increasing economic intervention and desire to promote young technocrats into state economic management.

Foreign investors hope that strengthening institutions will counter the negative impact of personnel changes. They generally welcomed the new powers devolved to the State Investment Committee which, as a one-stop shop, now issues subsoil licenses, negotiates subsoil use contracts and oversees license administration. Kazakhstan’s government also appears amenable to adopting in the near future an independent Oil and Gas Regulatory Agency (OGRA). Supported by the international oil and gas community, OGRA would regulate operations in the oil and gas sector and act as an autonomous, non-political and professional republican apparatus, free of government supervision. — SC

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