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23 February 2024

Kazakhs ban oil production sharing agreements

By Agencies

Kazakhstan will ban agreements that give foreign energy companies he investors rights to large portions of the country’s natural resources under favorable terms, the government said on Thursday.


The decision comes with concern growing among foreign investors about increasing pressure as the Central Asian nation seeks to claim further control over its vast energy sector.


The government Web site said that Prime Minister Karim Masimov told a conference of tax officials that existing deals – known as production sharing agreements – would be kept in place.


However, he said subsoil mineral taxes could be reviewed, raising the specter of increased costs for energy companies.


“We live in different times and in special circumstances,” Masimov was quoted by the Web site as saying.


Production sharing agreements were used widely in the first years after the Soviet breakup as former Soviet republics such as Russia and Kazakhstan granted tax breaks and investment incentives to foreign energy giants in order to speed up development of oil and gas resources.


In recent years, however, both Russia and Kazakhstan have grown unhappy with the conditions and the speed with which oil and gas fields were being developed and have sought to renegotiate the PSAs.


A week earlier, the government warned foreign companies that could be stripped of their licenses to develop energy and mineral resources if they fail to live up to contractual obligations.


State-owned gas firm KazMunaiGaz last month secured a deal to boost its stake in the giant Kashagan field after months of wrangling with Italian consortium leader Eni SpA over delays in the project.


Meanwhile, authorities on Wednesday demanded a Chevron-led consortium do more to deal with tons of environmentally hazardous sulfur that have built up as a result of oil drilling at the massive Tengiz field on the Caspian Sea coast.


The US firm was fined more than $600 million (Dh2.2 billion) in October over a range of environmental infringements. (AP)