Oil and Gas

Chevron Gets Kazakh Blessing over Oil Project


Chevron secured crucial backing from the Kazakh president over its huge Tengiz oil project on Friday, but foreign investors remained wary as a row over another major Western oil project remained unsolved.

Chevron CEO Dave O'Reilly flew to Kazakhstan on Friday for talks with President Nursultan Nazarbayev, a day after a Kazakh parliamentarian urged the government to halt Chevron's venture developing the Tengiz oil deposit due to ecological violations.

O'Reilly quoted Nazarbayev as telling him that "Tengiz is an excellent example of how the government and a foreign investor can work together successfully," according to the Kazakhstan Today news agency.

"Today during our meeting both the president of Kazakhstan and the prime minister expressed support for our company's activities," he said.

Kazakhstan's recent assertiveness in its dealings with foreign oil companies has alarmed investors, jittery in the wake of the government's row with an Eni-led consortium developing another huge Caspian Sea deposit, Kashagan.

Kazakh officials suspended Kashagan operations last month, also accusing it of environmental breaches.

Kazakhstan says Kashagan is an isolated case stemming from the project's continuous start-up delays and cost overruns, and denies it is part of a wider campaign against foreign investors.

Speaking on Friday in Italy, Eni CEO Paolo Scaroni, who came to Kazakhstan last week to try to resolve the issue, said it was difficult to predict when the dispute would end.

"The talks involve many parties, it is difficult to make forecasts," Scaroni said. "We will tackle the talks with the best spirit and the Kazakh government will do the same. There are no reasons for pessimism."

Tengiz and Kashagan

Just like Kashagan, Chevron's Tengiz project is one of the world's biggest oilfields and its expansion is at the centre of Kazakhstan's ambition to become a global energy powerhouse.

In a further parallel with Kashagan, Tengiz came under fire earlier this year when officials threatened to halt its licence if it did not produce a plan to deal with sulphur stocks. The case was eventually dropped.

However, concerns about investment climate rose again last week when Kazakh lawmakers started considering draft legislation that would allow the government to break the terms of contracts with oil investors.

Kazakh Economy Minister Bakhyt Sultanov, speaking to reporters in Astana, defended the law on Friday.

"I don't think it will negatively affect investment climate because everyone must understand that every state must have a legal basis to take into account its economic interests and national security," he said.

The Eni-led AgipKCO consortium, which also includes Royal Dutch Shell , Exxon Mobil and ConocoPhillipsamong others, has angered the government by pushing back the date the complex project might produce oil to the second half of 2010 from 2005 originally.