The State Tax Committee in Kazakhstan has revoked an important tax exemption for the Agip-led consortium that is developing the Kashagan field located in the Caspian Sea. Now the consortium will have to meet value-added-tax liabilities backdated over the last four years. Two certificates issued in 1999 and 2000 by the government had so far exempted the consortium from most VAT liabilities. An official from the tax committee said the certificates contradicted Kazakh law and were given prematurely. VAT exemption will now only be allowed once oil extraction has started, and not during the exploration stage, he added.
The government's decision follows a similar attempt in November 2002 to renegotiate the terms of the production-sharing agreement for Tengizchevroil, the consortium operating the giant Tengiz field. Various Kazakh government officials have stated that agreements signed in the 1990s on development of the country's oil riches were too generous to private-sector companies.
The Agip-led KCO consortium is comprised of ConocoPhillips, ExxonMobil, Shell, Total SA and Inpex.