Comments on: Kazakhstan v. ENI: Showdown @ Kashagan http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/ American Foreign Policy Analysis in Central Asia Sun, 23 Nov 2008 09:57:04 +0000 http://wordpress.org/?v=wordpress-mu-1.0 by: Lamont County Environment » Blog Archive » Kazakhstan vs. ENI: Showdown http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-2090 Wed, 07 Nov 2007 22:42:57 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-2090 [...] ….in general oil majors operating in Kazakhstan are dealing with some seemingly unresolvable problems. We don’t like sulfur in our fuels, for instance; sour gas creates more pollution and is harder to refine. When that sulfur is extracted out, it goes into a world market that is supply-glutted. Many of the environmental violations for oil in Kazakhstan have to do with a sulfur that nobody wants, causes pollution, and that oil companies would be more than happy to get rid of at almost any low price you could name….(Full Story) _______________ Right, and how will HAZCO make money on the sulphur it alleges it will produce in Bruderheim for the world market? [...] […] ….in general oil majors operating in Kazakhstan are dealing with some seemingly unresolvable problems. We don’t like sulfur in our fuels, for instance; sour gas creates more pollution and is harder to refine. When that sulfur is extracted out, it goes into a world market that is supply-glutted. Many of the environmental violations for oil in Kazakhstan have to do with a sulfur that nobody wants, causes pollution, and that oil companies would be more than happy to get rid of at almost any low price you could name….(Full Story) _______________ Right, and how will HAZCO make money on the sulphur it alleges it will produce in Bruderheim for the world market? […]

]]> by: Central Asia » Blog Archive » Kazakhstan v. ENI: Update http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1525 Wed, 05 Sep 2007 04:49:14 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1525 [...] More updates soon, I’m sure.  For background, check last week’s comprehensive post. [...] […] More updates soon, I’m sure.  For background, check last week’s comprehensive post. […]

]]> by: bboyd http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1510 Tue, 04 Sep 2007 16:09:54 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1510 Dear Julian, You are absolutely correct. And all the more reason to hold on to what you have, or try to gain more. One thing missing from all of our analyses is that oil prices could go down. Right now the cycle of oil prices has had an extended high (trying not to use the word 'peak' here) because of not just high demand but severe supply constraints due to wars, sanctions, and low-level conflicts in Nigeria, etc. And disinvestment which is being prolonged by multiple agents (states and companies). Once Iraq is solved (a big "once", yes?) I have a feeling that political attention will go to other areas of oil conflict, supply contraints will reduce, and oil price will go down some. When oil prices go down, then the urge for states to expropriate assets also goes down. The urge for oil companies to pull up oil in technically-difficult locations also goes down. So having oil come out of the ground NOW would be much better for Kazakhstan and Kashagan partners, income-wise. High or low price, both the state and the consortium need each other, so hopefully they can work this out. Thanks for a great comment. Come back anytime! Bonnie Dear Julian,
You are absolutely correct. And all the more reason to hold on to what you have, or try to gain more.

One thing missing from all of our analyses is that oil prices could go down. Right now the cycle of oil prices has had an extended high (trying not to use the word ‘peak’ here) because of not just high demand but severe supply constraints due to wars, sanctions, and low-level conflicts in Nigeria, etc. And disinvestment which is being prolonged by multiple agents (states and companies). Once Iraq is solved (a big “once”, yes?) I have a feeling that political attention will go to other areas of oil conflict, supply contraints will reduce, and oil price will go down some. When oil prices go down, then the urge for states to expropriate assets also goes down. The urge for oil companies to pull up oil in technically-difficult locations also goes down.

So having oil come out of the ground NOW would be much better for Kazakhstan and Kashagan partners, income-wise. High or low price, both the state and the consortium need each other, so hopefully they can work this out.

Thanks for a great comment. Come back anytime!

Bonnie

]]> by: Julian Lee http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1500 Tue, 04 Sep 2007 11:20:25 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1500 Here’s the math: If you own 18.52% of the PSA, you were getting 18.52% of 90% of the oil, which comes to 16.65% of the yield. (.1852 x .9 = .1665). If you suddenly find yourself getting 18.52% of 60% of the oil, your yield percentage drops to 11.124% of the yield. All true, but when the contract was signed the oil was worth $20//bbl, it is now worth $70/bbl. This changes the maths a bit. With 13 billion barrels of recoverable reserves, the original 16.65% of the yield was worth $43.29 bn (in money of the day terms). The 'lower' 11.124% of the new yield is worth $101.23 bn. OK, that is down from the more than $150 bn that the 16.65% would have been worth at $70/bbl, but still a pretty good return for the investor. Of course the same is also true for the Kazakh government, even with 10% profit oil their income rises by 3.5 times from what they would have got at $20/bbl oil. So they are much better off in monetary terms, the big problem for them is the delay until they start earning. Here’s the math: If you own 18.52% of the PSA, you were getting 18.52% of 90% of the oil, which comes to 16.65% of the yield.
(.1852 x .9 = .1665).
If you suddenly find yourself getting 18.52% of 60% of the oil, your yield percentage drops to 11.124% of the yield.
All true, but when the contract was signed the oil was worth $20//bbl, it is now worth $70/bbl. This changes the maths a bit. With 13 billion barrels of recoverable reserves, the original 16.65% of the yield was worth $43.29 bn (in money of the day terms). The ‘lower’ 11.124% of the new yield is worth $101.23 bn. OK, that is down from the more than $150 bn that the 16.65% would have been worth at $70/bbl, but still a pretty good return for the investor.
Of course the same is also true for the Kazakh government, even with 10% profit oil their income rises by 3.5 times from what they would have got at $20/bbl oil. So they are much better off in monetary terms, the big problem for them is the delay until they start earning.

]]> by: Rambling Intelligence: Week Ending September 2 « Ramblin’ Gal http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1437 Sun, 02 Sep 2007 17:22:18 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1437 [...] Former Soviet Union: ♦ At NewEurasia.net, Ben Paarman looks at possible changes in Central Asia’s relations to great powers via the tired metaphor of the Great Game.  A great read  for Central Asia watchers. ♦ Get up-to-date on the new problems in the Caspian/Kazakhstan oil at the Kashagan field, at FPA Central Asia. ♦ Russia is going to put missiles in Belarus, if NATO is going to put them in Poland. ♦ Anna Politovskaya, the brave, committed, and murdered Russian journalist, would have been 49 this past week.  Robert Amsterdam documents the investigation as driven by political agendas rather than a desire for justice. [...] […] Former Soviet Union: ♦ At NewEurasia.net, Ben Paarman looks at possible changes in Central Asia’s relations to great powers via the tired metaphor of the Great Game.  A great read  for Central Asia watchers. ♦ Get up-to-date on the new problems in the Caspian/Kazakhstan oil at the Kashagan field, at FPA Central Asia. ♦ Russia is going to put missiles in Belarus, if NATO is going to put them in Poland. ♦ Anna Politovskaya, the brave, committed, and murdered Russian journalist, would have been 49 this past week.  Robert Amsterdam documents the investigation as driven by political agendas rather than a desire for justice. […]

]]> by: A Second Hand Conjecture » News Brief, Pretty In Pink Edition http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1329 Wed, 29 Aug 2007 00:34:30 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1329 [...] Bonnie Boyd on the coming troubles of ENI in Kazakhstan. [...] […] Bonnie Boyd on the coming troubles of ENI in Kazakhstan. […]

]]> by: The Conjecturer » News Brief, Pretty in Pink Edition http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1328 Wed, 29 Aug 2007 00:33:46 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1328 [...] Bonnie Boyd on the coming troubles of ENI in Kazakhstan. [...] […] Bonnie Boyd on the coming troubles of ENI in Kazakhstan. […]

]]> by: Global Voices Online » Kazakhstan: Kashagan Showdown http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1320 Tue, 28 Aug 2007 17:24:53 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1320 [...] Bonnie Boyd has a comprehensive background post on the current crisis involving the Kazakh government and the international consortium developing the country’s biggest oil field, Kashagan. Share This [...] […] Bonnie Boyd has a comprehensive background post on the current crisis involving the Kazakh government and the international consortium developing the country’s biggest oil field, Kashagan. Share This […]

]]> by: Ben http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1319 Tue, 28 Aug 2007 17:24:16 +0000 http://centralasia.foreignpolicyblogs.com/2007/08/28/kazakhstan-v-eni-showdown-kashagan/#comment-1319 Excellent post! Thanks a lot for sharing your insight! Excellent post! Thanks a lot for sharing your insight!

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