Kazakhstan to take back resources

Kazakhstan to take back resources

By Isabel Gorst in Moscow

Published: February 14 2008 19:08 | Last updated: February 14 2008 19:08

Kazakhstan will this year nationalise all natural resource projects where investors have breached contracts, Karim Massimov, prime minister, said on Thursday.

Mr Massimov also said no new natural resource contracts would be negotiated until a new tax code enabling the government to squeeze more revenues out of oil and gas investors was finalised this autumn.

His remarks came a week after Nursultan Nazarbayev, Kazakhstan’s authoritarian president, called for the state to strengthen its control over the oil and gas sector in his annual address to the nation.

“Your instruction to return fields held by unscrupulous natural resource users to the state will be fulfilled during the course of this year,” Mr Massimov told a government meeting chaired by Mr Nazarbayev.

Kazakhstan claims that many of the investors that scooped up natural resource licences in chaotic tenders in the 1990s have failed to fulfill their commitments. The government expects to uncover violations at over half the 834 licences being investigated, but has not released details of which projects are under scrutiny.

KazMunaigas, Kazakhstan’s increasingly assertive state oil company, is expected to inherit confiscated oil licences.

Julia Nanay, a senior director at PFC Energy, said: “This initiative is designed to further Kazakhstan’s goal to build up KazMunaigas as the dominant oil industry player in the republic.”

Regulations entitling KazMunaigas to pre-empt the sale of onshore oilfields helped the company boost production by more than 29 per cent last year to 16.7m tonnes, more than a quarter of the republic’s total output.

A new law introduced last October empowering the government to annul oil contracts deemed harmful to the national interest has not yet been invoked.

However, it intensified pressure on an international oil group led by Eni of Italy to settle a dispute about delayed production and ballooning costs at the Kashagan field that ended when investors allocated a larger share in the flagship Caspian Sea project to KazMunaigas.

Mr Massimov said a new tax code now being formulated would “define precise rules of the game for natural resource users and increase the [government] take from the raw materials sector”.

“Until the new tax code is adopted all negotiations with natural resource users will be stopped,” he added.

Officials are discussing an increase in both oil production and export levies and are considering applying the new rules to existing as well as future projects.

Increased oil tax collection will allow the government to reduce the tax burden on other sectors, stimulating diversification of the economy away from natural resources.