Quick Take: Kazakhstan Won't Grease the Wheels

Most of what I know about glorious Kazakhstan, I learned from Borat. But I also happen to know that the country is home to one of the largest oil discoveries in recent decades: the giant Kashagan field.

The energy climate has shifted dramatically since Kashagan's discovery in the Caspian Sea in 2000. Oil prices have soared, but so has the cost of undertaking large energy projects. The project in Kazakhstan, once slated for initial production in 2005, is now looking at a start-up around 2010. Lead operator Eni (NYSE: E  ) estimates that costs for the initial production phase have doubled to $19 billion.

Kazakhstan appears to be using the delay and associated cost overruns as part of a pretext to gain a bigger slice of the petroleum pie. The government has also lobbed a charge of environmental breaches for good measure. Operations were suspended late last week, and Eni and company have two months to renegotiate a contract with the country.

Consortium members ExxonMobil (NYSE: XOM  ) , ConocoPhillips (NYSE: COP  ) , and Royal Dutch Shell (NYSE: RDS-A  ) (NYSE: RDS-B  ) may be getting used to this routine by now. Exxon and Royal Dutch have faced a similar bad habit in their dealings with Russia, and Venezuela's Hugo Chavez has hammered Conoco.

This is a Borat-style oil grab "for make benefit glorious nation of Kazakhstan." At least Mr. Chavez has had the decency to do away with false pretexts.

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Fool contributor Toby Shute doesn't own shares in any company mentioned. The Motley Fool has a glorious disclosure policy.

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