Astana Eager for Oil Profits

The Kazak government's growing impatience over plans to develop the Kashagan field has spurred the world's oil giants into action.

In response to pressure from Kazak president Nursultan Nazarbaev to choose a sole operator for the Caspian field, the international consortium OKIOC (the Offshore Kazakstan International Operating Company) finally named Agip of Italy, the smallest of four candidates, for the position.

And, although Kazakstan sold its share in OKIOC two years ago, it is clear that Nazarbaev is determined to ensure Astana plays a major role in the decision-making process.

Analyst Ulbolsyn Kojantaeva says it is very much in Kazakstan's interests to see the coastal oil fields developed as swiftly as possible since they will have a direct impact on proposed trans-Caspian pipeline projects.

At the end of this month, interested parties will discuss plans to build a new pipeline through Azerbaijan and Georgia to the Turkish port of Ceyhan - an initiative that enjoys the whole-hearted backing of the new US administration.

This year will also see the completion of a Russian pipeline from Tengiz to Novorossiysk, on the Black Sea, which could significantly boost the overall volume of Kazak oil exports.

Other options include a route through the Persian Gulf - complicated by US sanctions against Iran - and a pipeline to China's Xinjiang province, which borders Kazakstan.

Kazak prime minister Kasymjomart Tokaev pointed out that, with the discovery of large reserves in the Kazak sector of the Caspian Sea, it was essential to create a reliable transportation infrastructure to deal with the potential increase in oil extraction.

With oil prices at an all-time high and interest growing in the Caspian region, Kazakstan is not afraid of taking the initiative - a fact which the foreign oil companies can hardly ignore.

Last month, Keith Dallard, manager of OKIOC, commented that mutual trust was paramount in the Kashagan project, adding that it would be impossible to achieve success without the full cooperation of local partners.

However, the choice of sole operator will undoubtedly bring the situation forward dramatically. It marks the culmination of a long campaign which hit an unexpected twist earlier this month when BP Amoco pulled out of the consortium.

The company's representative explained that BP had agreed to sell its stake to France's TotalFinaElf because it had no chance of becoming sole operator of the Kashagan field itself.

This left the French company with the biggest share in the OKIOC consortium, prompting widespread speculation that it would be elected to manage the world's fifth largest oil field.

However, the decision to choose Agip above ExxonMobil, Royal Dutch/Shell and TotalFinaElf took many observers by surprise.

Some believe the choice was politically motivated since Agip has yet to announce its preferred route for exporting Kashagan oil.

Others comment that the decision may reflect a general lack of confidence in the potential output of the Kashagan field where it has yet to be established how much oil is actually recoverable.

Kazak analyst Andrei Gubenko said that, in any case, Agip had demonstrated full commitment to the Kashagan project and to the existence of large oil reserves.

And the Kazak authorities have also been quick to ascribe the latest development to firm faith in the potential of the Pre-Caspian Basin.

First Vice-Premier Danial Akhmetov said the decision to appoint the Italian company proved that the earlier doubts of investors were unfounded.

However, local expert Yaroslav Razumov said the opposite was true - the recent news of BP Amoco's withdrawal and the unexpected choice of operator pointed towards widespread disenchantment with the project as a whole.

In any case, we can be sure that the Astana leadership has every intention of strengthening its position as events unfold and taking full advantage of record oil prices ($29.91 a barrel) to protect the country's strategic interests.

Altynai Mukhambediarova is a political correspondent from Almaty

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