KAZAKHSTAN: Kazakh parliament approves law which gives government power to unilaterally break contracts with foreign oil companies

Record ID: 343933

  • Title: KAZAKHSTAN: Kazakh parliament approves law which gives government power to unilaterally break contracts with foreign oil companies
  • Date: 26th September 2007
  • Summary: DEPUTIES IN CORRIDOR
  • Embargoed: 11th October 2007 13:00
  • Keywords:
  • Location: Kazakhstan
  • Country: Kazakhstan
  • Topics: Domestic Politics,Energy
  • Reuters ID: LVA5PIR6EKQ5QGVHGBVQMNIG3V37
  • Story Text: Kazakh lawmakers passed a bill on Wednesday (September 26) allowing the government to unilaterally break contracts with foreign companies, potentially threatening an Italian-led consortium developing a giant oil field.
    Kazakhstan has already stopped operations at the huge Kashagan oil field run by Italian energy firm Eni in a row over mounting costs and project delays but the legislation raises the stakes further.
    The unanimous vote in the lower house of parliament gave the state extra leverage over Eni and its main partners Royal Dutch Shell, Exxon Mobil Corp and ConocoPhillips as talks over Kashagan enter their final stage ahead of an Oct.22 deadline.
    The law, approved without any public debate, will come into force once passed by the upper house and signed by President Nursultan Nazarbayev. Both chambers are backed with Nazarbayev loyalists so the upper house stage is seen as a formality.
    Under the law, Kazakhstan could force retrospective changes to contracts with domestic or foreign companies or break their terms altogether, if it saw a threat to the country's national security.
    Kazakhstan says Kashagan is an isolated case and not aimed at harming investors. Sergei Bobrov, an MP from the pro-presidential Nur Utan Party stated that the new law, in his opinion, merely serves the interests of its country.
    "The investment climate in Kazakhstan today is being developed by internationally recognised companies; by companies that respect the laws of their own countries as well as those of countries in which they operate. So it (the new oil law) will not scare off legitimate investors, and these are the ones that Kazakhstan needs," he told reporters.
    Kazakhstan's new-found assertiveness in the oil sector echoes Russia's row with Royal Dutch Shell which ended with the firm losing control of the giant Sakhalin-2 energy project, the world's largest liquified natural gas development.
    Other energy projects in Kazakhstan include the Tengiz oil field, developed by U.S. oil major Chevron through a joint venture, and Karachaganak gas field, co-led by Eni and Britain's BG.
    Investors developing big projects have flocked to Kazakhstan in recent weeks to secure backing from top officials in the wake of the Kashagan row.
    Last week, Chevron CEO Dave O'Reilly met Nazarbayev in the capital Astana.
    On Tuesday, BG Chief Executive Frank Chapman met Prime Minister Karim Masimov for closed-door talks.

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