Environmentalism has long hindered development of the oil and gas industry. But now-in a variety of places around the world-it also has become the means of taking projects away from their developers and putting them into altogether different hands. Consider Kazakhstan, which is using alleged environmental violations as a threat to revoke the license of a consortium led by Italy’s Eni SPA unit Agip to develop the vast offshore Kashagan field.
Nurlan Isakov, the country’s environment minister, said the work of the Agip KCO consortium, which includes Royal Dutch Shell PLC, ExxonMobil Corp., and ConocoPhillips, could be stopped because of environmental concerns. His remarks came as Eni and the Kazakh government began talks on the project’s future.
Isakiv said if the obligations Agip has taken upon itself are not complied with, Kazakhstan is by law obliged to revoke the permit because further operations will cause even more ecological damage. Work at Kashagan may be stopped altogether, he said.
Deja vu
Does that remark sound familiar? If not, compare it to statements issued by the Russian government when it sought control of Shell’s Sakhalin-2 oil and gas venture. According to one analyst, Isakiv wants to increase pressure on the consortium and change the terms to favor the Kazakh government.
According to reports, the consortium understands that the complaints raised by the Kazakh authorities are intended to raise the pressure on the group in talks over the Kashagan contract. To underscore the consortium’s determination, Eni Chief Executive Paolo Scaroni is likely to arrive in Kazakhstan for talks this week. But any agreement could take months.
One consortium spokesperson said there should not be any surprises as KazMunaiGaz, the Kazakh national oil company, is a member of the consortium. That may be, but there may be other issues-and other parties-at play here.
Enter China
Just days before Kazakhstan issued its warning to the Eni-led consortium, it also signed an agreement to build pipelines to carry oil and gas from fields near the Caspian Sea to China. “The Caspian will be linked to western China,” Kazakhstan President Nursultan Nazarbayev said after a meeting with Chinese leader Hu Jintao in the Kazakh capital of Astana on Aug. 18. According to one report, the agreement marks a setback for the European Union and the US, both of which have urged Kazakhstan to export oil and gas across the Caspian to western markets. Be that as it may, the Kazakhs clearly feel they have greater interests in serving nations to the east, mainly China.
Last year, Kazakhstan and China completed a pipeline from a field owned by Chinese National Petroleum Corp. in the central part of the republic to China’s Xinjiang province.
Funny, no one seems to recall reading about any environmental impact reports prior to the construction of that line or, for that matter, any mention of environmental problems during its construction.