Italian oil company Eni
The field, which was discovered in 2000, is being developed by a group of Western oil companies led by Eni and also including Royal Dutch Shell
Months ago, Kazakh officials, blaming bad decisions by Eni on the production pushback and cost increases, demanded that the company be removed as operator. Now, the parties have finally reached an agreement that essentially has two moving parts:
- Eni will share the role of operator with Exxon, Shell, and Total. No biggie there, since companies frequently share the operator position on major projects. At the same time, the consortium will pay Kazakhstan an additional amount between $2.5 billion and $4.5 billion, with the amount determined by the price of oil.
- For a payment of $1.78 billion, the country's state oil company, JSC NC KazMunaiGaz, will see its participation in the project doubled to 16.6%, a change that will occur at the expense of the other participants. I wouldn't be displaying analytical brilliance and you wouldn't be surprised if I told you that that payment is well below market for the increased stake.
But the real key to these events and their ultimate resolution, it seems to me, is that they demonstrate once again the willingness of governments in certain producing countries to apply headlocks to even the biggest Western companies. Russia, for instance, has squeezed both Shell and BP
And for Fools with a taste for energy investments, while 2008 will likely require far more dexterity than did 2007, the Kazakh crusher should only serve to highlight the importance of remaining attentive to this vital and changing sector.
For related Foolishness:
Total is a pick of the Motley Fool Income Investor team. Find out why with a free 30-day trial subscription to this time-tested newsletter.
Fool contributor David Lee Smith doesn't have positions in any of the companies mentioned. He does welcome your questions or comments. The Motley Fool's disclosure policy remains in good standing even in Kazakhstan.
More from The Motley Fool
A Reduced Payout Could Be Coming for These High-Yield Dividend Stocks
These three stocks need to learn to live within their means.
Why I Will Never Buy Eni S.p.A. Stock
On the surface, Italy's Eni is just another oil major, but dig a little and it's more Italian than you may think
3 Energy Stocks to Buy with Dividend Yields Above 5%
Want more yield for your portfolio without adding an excessive amount of risk? Enterprise Products Partners, Holly Energy Partners, and Eni are worth considering today.