Fitch: Increased State Role in Kazakh Oil & Gas - Limited Credit Impact
01.04.08 18:43
/Fitch Ratings, London/Moscow, April 01, 08/ - Fitch Ratings has today said
that an increased state role in the Kazakh oil and gas industry announced
recently by the Kazakhstani Prime Minister looks unlikely to have
implications for the credit ratings of companies operating in this sector
in the short-to-medium-term.
"Overall, on the positive side, an increase of the state role could underpin
greater stability and certainty for all the players in the Kazakh oil and gas
sector," says Angelina Valavina, Director of Fitch's Energy, Utilities &
Regulation team. "In addition, it could set clearer rules of the game, albeit
tightened, and provide more clarity and coherence pertaining to industry
regulation."
Fitch notes that National Company KazMunaiGaz (NC KMG;
BBB'/Negative) is well placed to capitalise on its close ties to the
government and gain most of the benefits from the state reasserting control
over the oil and gas industry amid the first right of refusal on acquisition
of any on-shore projects in Kazakhstan, as well as tangible state support.
In regard to the international oil and gas majors operating in Kazakhstan, a
potential increase of the state role in the sector could limit their equity
upside, but is unlikely to have negative impact on their credit profile.
Furthermore, seeking to replenish reserves, they could still maintain access
to vast reserves in Kazakhstan.
In case of severe tightening of the state control (which seems unlikely), Fitch
will closely monitor the companies' ability to distance themselves from
political ambiguities and balance their strategic objectives with the state's
political agenda. The emphasis would be placed on whether the state
supports aggressive financial policies to increase its participation in the
industry, which might jeopardise the companies' credit metrics. In addition,
an increase of a state role could lead to lower transparency. Nevertheless,
NC KMG has been successful in managing its assets to date and has
introduced better corporate governance, including more stringent financial
policies and improved transparency. In regard to international oil and gas
majors, any terms of their potential buyout from existing projects will also be
analysed, which is likely to have limited impact on these entities credit
profiles given that their capex for the Kazakh oil and gas projects has
already been incorporated into the ratings.
At the same time, rising uncertainty could jeopardise the implementation of
the country's ambitious oil and gas production expansion programme, which
requires substantial investments and expertise. Thus, the balance between
national resources and ability to exploit them without foreign assistance
needs to be maintained.
The call of President Nazarbayev in his state-of-the-nation address for the
state to strengthen its role as a participant on the international oil and gas
markets prompted the announcement by Kazakhstani Prime Minister in early
February that Kazakhstan will withdraw licences for natural resource
projects where investors have breached contracts. A number of oil and gas
companies, including consortia developing the Karachaganak field, the
Tengiz field and the Kashagan offshore project, have been subject to
intense scrutiny over the last several months by Kazakh officials over their
environmental stewardship.
As Fitch highlighted in its previous research reports, current favourable oil
and gas industry fundamentals provide impetus for the governments of oil
producing countries to tighten their grip on the industry, which has been
seen in places as diverse as Russia and Venezuela. Kazakhstan will be
influenced by the fact that the oil and gas industry is essential to the
country's economy, contributing about 30% to government revenue.
Furthermore, future substantial oil production expansion is expected from
fields which at present are mainly operated by international oil majors.
Contacts:
Angelina Valavina, London, Tel: +44 207 682 7383;
Andrew Steel, Tel: +44 207 862 4086
Media Relations:
Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364;
Alla Izmailova, Moscow, Tel: +7 495 956 9903
[2008-04-01]