Kazakhstan Not Giving an Inch

Kazakhstan's President Nursultan Nazarbayev has said he will not make concessions to Tengizchevroil over financing for the Tengiz oilfield. There has been a dispute between the government and the ChevronTexaco-led joint venture on how to finance the expansion of the country's largest oilfield. Tengizchevroil is developing the huge onshore Tengiz oilfield in western Kazakhstan and is the largest producer in the nation. It suspended a $3 billion expansion plan last month over the financial spat. TCO wants to reinvest its profits in the expansion works. Kazakhstan says it should borrow abroad and continue to pay tax on its profits, as otherwise the budget would lose out.

"Yesterday and today we debated the point, with Chevron saying it would ensure that Kazakhstan's budget does not lose $600 million, and we would agree to proceed with expansion works," Nazarbayev told reporters after chairing a meeting of investors, the Foreign Investors' Council, in the new capital.

"I believe we will reach a consensus in the nearest future." Nazarbayev has personally supported the venture, set up in 1993 and often highlighted as an investment success story and a beacon for Western businesses. But he has made it clear Kazakhstan would not back down in the dispute with TCO. "They have proposed reinvesting their profits in the expansion. Among other things, this means fast amortization, and Kazakhstan's budget may lose $600 million in the next three years," he added. "Such is the situation."

The joint venture's expansion plan aims to double output to 440,000 barrels per day after 2005 from this year's expected 254,000 bpd.

TCO is led by ChevronTexaco with 50 percent; KazMunaiGaz holds 20 percent, ExxonMobil 25 percent, and LUKArco 5 percent.