Thursday, September 27, 2007

Kazakhstan In Oil Dispute

by Stewart Douglas

The parliament of Kazakhstan has passed a bill that is set to allow the government to cancel existing contracts it has entered with foreign-domiciled companies where doing so is reflective of the interests of the country.

The law, which still requires ratification by the President of Kazakhstan has been designed to enable the government to strike down contracts with an oil consortium of Western countries, with whom a dispute has arisen over one of the country’s largest oil fields.

The dispute has arisen as a result of a call for renegotiation of a contract signed in 2001 by the Kazakhstan authorities, who claim that the Western consortium has breached its previous agreement on counts of tax, the environment and delaying production unnecessarily.

Should the law be passed, it will allow the Kazakhstan government to cancel the contract currently in place with foreign investors, news which will almost certainly hinder prospective outside investment in the nation in the near future.

Both sides to the dispute are currently at loggerheads, with the authorities saying they do have a ‘plan B’ should the deal fall through. Additionally, they have positively suggested that some form of international arbitration may be on the cards if some amicable resolution cannot be met soon.

Many analysts within Kazakhstan, and political commentators across the world feel there have been a number of management failings at the oil consortium, and that the authorities are correct to pose questions as to progress and to enforce the agreement signed six years ago.

However, it has also been seen as something of a trend towards a lack of cooperation from the oil rich central Asian country and Western investors, which it is thought could pose problems in the future.

The dispute looks set to continue for the short term, with no side willing to budge on its principals.

 

 

 

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