GSRW: Brief analytic review of oil and gas sector in Kazakhstan

/IRBIS, Jan 24, 01/ - LOCAL OIL MAGNATES CAN SLEEP THE SLEEP OF THE JUST (original title of the GSRW news). According to preliminary estimates, Kazakhstan produced 35.2 million tonnes of oil (including gas condensate) in 2000. The number included Tengizchevroil production of 10.4 million tons of oil (or 30% of total oil production in the country). It is a well-known fact that Tengizchevroil's oil is clean and even more expensive than Brent. At the average price that equals to $210 per ton, gross revenue amounts for $2.184 bln. Some $721-764 mln should be transferred in taxes to the state budget under the existing tax rate of 33-35%. And where are the dividends on the 20% state-owned stake? Oil production costs make up $5-6 per barrel and export price ranges from $20 to $27 depending on several factors, including brand, seller and sale scheme, and purchaser. Let us consider several calculations which do not claim to be exact, but are suitable for a macroeconomic level. Thus, exported 24.3 million barrels of Urals for a modest price of $20 per barrel ($150 per tonne, 1 tonne = 7.5 barrels) mean production of commodity worth $3.645bn, including one third to be transferred to the national budget in taxes ($1.203- 1.276bn). We see that a lion's share of the state budget revenues should come from oil sales, not taking into account the revenues from privatisation, dividends and 8% growth of Kazakhstani economy last year. And what if a more realistic price (for example $240), asked by oil sellers during the summer oil crises, is taken into account? The majority of Kazakh citizens are keenly interested in answers to the numerous questions arising in this connection. It is a good point to make historical excursus and remind of the Samotlor oil and gas field in Siberia which was the foundation of well-being of over 300 million Soviet people. The military and industrial sector was maintained using proceeds from oil. These were hydrocarbons that supported the Soviet economy. Kazakhstan has a similar field, Tengiz. The second excursus: last year's sensational (and forgotten due to the electoral rush) investigation by the US Department of Justice of the case of G. Giffen who holds a reputation of a penetrating and tough money-maker. (According to US experts, this official who mediated the contract with Chevron harvests 7.5 cents from each barrel of Tengiz oil, the sum totalling $5.85m in 2000). The US Congress will consider the Kazakh case and the role of Mr.Giffen at special hearings in spring 2001. Such interest is explained, according to expert investigations, by Kazakhstan's leading corruption 'scores' among all the CIS nations. According to CIS Intergovernmental Statistics Committee, Kazakhstan has the most developed grey economy in the CIS. This index reaches 30% of GDP compared with Russian 22% and Ukrainian 20%. However, the situation with Giffen's case can change after the change of administration in the White House. The new administration has several representatives of oil lobby. Chevron board of directors' member Condoleezza Rice was appointed US President's assistant for national security (the company named its biggest tanker in her honour). Besides, US Vice President Cheney has direct contacts with oil business and Chevron Corporation. Ex-Secretary of State Baker who has close relations with president's family is an employee with a consulting firm, Chevron's partner. Besides, the corporation is the main operator in the Tengiz field and appears in the majority of joint Kazakhstani-US projects. Some people believe the new US administration will close its eyes to this corruption scandal. The US Carnegie Fund's expert for Russia and CIS, Ms. Olcotte, says the US foreign policy will not undergo any considerable changes unless Washington does not receive access to Iraqi and Iranian oil resources. In other words, the 'big oil' of the Caspian basin will rule again. Consequently, the new administration is unlikely to dramatize problems with Kazakhstani or Azerbaijani democracy, said Ms. Olcotte. However, not all US figures adhere to this opinion. The chief international observer of the influential Washington Post, Michael Dobbs, says the shift in the White House can produce its impact on Kazakhstan's policy. Mr.Dobbs refers to the fact that US policy in Central Asia has four major piers: human rights, interests in oil, and counterweight to growing influence of Russia and of Islamic extremists. The law enforcement principle will inevitably weaken in this scheme. All the factors will be as topical as before but with different correlations. The US foreign policy, according to Mr.Dobbs, is a result of activities of numerous groups or, putting it more precisely, official lobbyists. Bush, Cheney and Rice's ties with the oil business do not mean they can ignore other interests. Relations with Kazakhstan can become a new challenge for the new White House's administration (following Borodin's case) concerning adherence to traditional values of the USA: triumph of law and extermination of corruption in US companies and in other states. US experts believe that further investigation of Griffen case can bring a profound influence on relations between Washington and Astana. The third excursus will be to summer 1999, when Premier Balgimbayev made a sudden suggestion to sell a 40% part of Kazakhstani stake in Tengizchevroil. That was 10% of the country's share in Tengizchevroil (that time Kazakhstan held 25%, Chevron 50%, and Mobile and Lukoil 25%). As a matter of fact, it was undisguised lobbying of Chevron interests, which happened at the time when oil prices boosted by 5-7 points. The hour of triumph for Kazakh oil began. So, the suggestion to sell the Kazakhstani stake evoked a storm of indignation and inspirited the opposition. Visit by Chevron president - who did not make secret of the company's intention to buy Kazakhstani stake in Tengizchevroil - to Kazakhstan cleared up the situation. Foreign experts believe Chevron instructed its partisan to play the role of a kamikaze. It would be more logical if the suggestion came from the oil and gas minister. The government usually stands for national interests, while the head of the oil sector suggests to "provide", "sell" etc., because it could be more efficiently from the economic point of view. This case evolved conversely. The head of government passed the "efficient" plan while the head of the national oil company opposed this idea (along with the Atyrau region akim and other figures). Information of The Great Silk Road World News Agency. 7, Gainsford Street, London, SE1 2NE, U.K. TEL/ FAX 44 0171 403 20 37