Environmental Charges Unlikely to Derail Chevron Contract
Environmental Charges Unlikely to Derail Chevron Contract
Kazakstan’s largest oil concessionaire, Tengiz Chevroil, has been threatened with having its license withdrawn because of accusations it breached environmental legislation. Analysts say that in reality, the Kazak government will never take such a step, since this would provoke a major crisis in relations with the United States.
Environmental protection minister Nurlan Iskakov recently announced that his ministry was to initiate legal proceedings against Tengiz Chevroil, to review and possibly revoke its extraction licenses for the Tengiz deposit should the company continued violating environmental regulations. The largest shareholder in Tengiz Chevroil is American oil giant Chevron.
According to the ministry, over 10 million tons of sulphur have accumulated near the Tengiz oil field, as a by-product of crude oil extraction. Only 400,000 tons a year can be used for commercial purposes, and such concentrations of sulphur are harmful to the environment. According to experts, once second-generation extraction facilities are in place, the quantity of sulphur produced will increase significantly, as production rises.
Experts say the build-up of sulphur is not a result of Chevron’s or Tengiz Chevroil’s environmental stance, but rather of the lack of a commercial market for such large amounts of the mineral.
The minister’s announcement, which has not yet evoked a reaction from Tengiz Chevroil, is merely an attempt to strengthen ecological controls, say observers, not to derail the contract that supplies one-fifth of all the oil produced in Kazakstan.
Since Tengiz Chevroil was the first joint venture financed by western capital, it is seen as being of particular political importance as a symbol of the country’s success in attracting foreign investment. As of October 2005, Chevron had invested over six billion US dollars in Kazakstan.
Since Chevron’s contract with Kazakstan is not publicly available, it is difficult to assess what responsibilities the company has for environmental protection, or how the situation will develop in the wake of the ministry’s statement. But analysts think any disruption of the contract with Chevron would signal a rollback from Kazakstan’s policy of diversifying its oil supplies. The country’s leadership will not jeopardise its relationship with the United States, the largest investor in the energy sector.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
Environmental protection minister Nurlan Iskakov recently announced that his ministry was to initiate legal proceedings against Tengiz Chevroil, to review and possibly revoke its extraction licenses for the Tengiz deposit should the company continued violating environmental regulations. The largest shareholder in Tengiz Chevroil is American oil giant Chevron.
According to the ministry, over 10 million tons of sulphur have accumulated near the Tengiz oil field, as a by-product of crude oil extraction. Only 400,000 tons a year can be used for commercial purposes, and such concentrations of sulphur are harmful to the environment. According to experts, once second-generation extraction facilities are in place, the quantity of sulphur produced will increase significantly, as production rises.
Experts say the build-up of sulphur is not a result of Chevron’s or Tengiz Chevroil’s environmental stance, but rather of the lack of a commercial market for such large amounts of the mineral.
The minister’s announcement, which has not yet evoked a reaction from Tengiz Chevroil, is merely an attempt to strengthen ecological controls, say observers, not to derail the contract that supplies one-fifth of all the oil produced in Kazakstan.
Since Tengiz Chevroil was the first joint venture financed by western capital, it is seen as being of particular political importance as a symbol of the country’s success in attracting foreign investment. As of October 2005, Chevron had invested over six billion US dollars in Kazakstan.
Since Chevron’s contract with Kazakstan is not publicly available, it is difficult to assess what responsibilities the company has for environmental protection, or how the situation will develop in the wake of the ministry’s statement. But analysts think any disruption of the contract with Chevron would signal a rollback from Kazakstan’s policy of diversifying its oil supplies. The country’s leadership will not jeopardise its relationship with the United States, the largest investor in the energy sector.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
