As your friendly Foolish reporter of Kazakhstan goings-on, I'm pleased to report that a squabble between a group of big Western oil companies and the Kazakh government may be getting closer to being put to rest. Nevertheless, chalk another one up for government heavy-handedness in yet another nation with impressive oil reserves.
In this case, a consortium of Western oil companies, led by Italy's Eni
As a result, production, which was originally expected to begin a couple of years ago, isn't likely to start until 2010. In addition, the estimated development costs are now expected to reach about $136 billion, up more than pocket change from the $57 billion originally forecast.
The changes have enraged the government of Kazakhstan, which has, at one time or another, threatened Eni's role as operator, waved the possibility of a severe fine in front of the consortium, and pushed for an expanded revenue participation in the project. It now looks like, in exchange for compensation totaling up to $4 billion and perhaps a twice-as-large stake of 16.8% of the project for Kazakhstan's state oil company, JSC NC KazMunaiGas, all parties may be content.
Given its impatience with government energy types and their strong-willed actions in Venezuela and Russia, Exxon's reaction to events in Kazakhstan has seemed important for the consortium. At this juncture, there are still mixed reports about the company's "druthers" with regard to upping KMG's participation. That being the case, final resolution of the dispute probably won't occur much before the latest mid-January deadline.
Beyond that, the Kazakhs are also involved in a strained relationship with another Western group led by Chevron
So those who follow energy carefully should be concerned about an expanding outbreak of government strong-arming in a number of important producing nations. That's but one of many, many reasons that I believe Foolish investors will find energy to be the most important of sectors and worthy of their close attention for many years to come.
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