Tengizchevroil Flap appears to be Contract Dispute

    By Chris Baldwin
    The question of whether Tengizchevroil pumped $1.4 billion too much oil over a period of years appears to hinge on a contract dispute.
    The Ministry of Oil and Gas and prosecutors say the joint venture, which is 50-percent-owned by Chevron Corp., pumped oil fr om below agreed-upon depths.
    Not so, says Tengizchevroil.
    The consortium “is in full compliance with its contractual agreements with the Republic of Kazakhstan," spokeswoman sLinsi Crain said in an email Friday.
    Tengizchevroil “holds and retains the right to produce without a maximum depth lim it,” she said. “This right is explicitly documented and reserved in our contract.”
    The consortium “is producing exclusively within the contractually documented area,” she added.
    The Agency for Fighting Corruption and Economic Crime said Thursday that the national prosecutor’s office given material on Tengizchevroil’s "illegal production of oil" worth $1.4 billion.
    Partners besides Chevron in Tengizchevroil include Exxon Mobil, with a 25 percent stake; government-owned KazMunaiGas, 20 percent; and Russia's Lukoil, 5 percent.
    Kazakhstan, Central Asia's largest economy and oil producer, has attracted more than $100 billion in foreign investment since gaining independence two decades ago. Much of it has been in the oil and gas and mining sectors.
    In recent years, Western energy firms have come under increasing pressure from the state as government firms seek to raise their influence in the sector.
    State acquisitions have often followed campaigns in which the government has accused companies of environmental or tax violations, or of breaking the terms of their contracts.
    Oil and Gas Minister Sauat Mynbayev said on June 21 that he suspected Tengizchevroil had produced "significant volumes" of crude above the levels specified by its license agreement.
    In March, the financial police accused the Karachaganak gas project of illegally earning $708 million in 2008 by producing more oil and gas than originally agreed upon.
    KazMunaiGas subsequently approached the consortium which owns the project, led by BG and Eni, with a proposal to acquire 10 percent in the project, Reuters reports.