Investors heed oil funding row
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Investors heed oil funding row

A dispute over the funding of oil pipeline development pinpoints increasing tension between foreign investors and the Kazakh authorities that may hamper the development of offshore Caspian oil resources.

Oil fields critical to Kazakhstan

IT WAS ONE of the worst rows in the seemingly never-ending series of spats between the government of Kazakhstan and the small band of foreign multinationals that invest in the country.

In November 2002 TengizChevroil (TCO) stopped production at the Tengiz oil field in north-western Kazakhstan, the republic's biggest, after a row broke out over how to fund the next stage of development. Until recently proceeds from exporting production through a ragtag collection of trains, tankers and swap deals has financed development.

TCO is an international consortium led by US oil major ChevronTexaco that has been working the 9-billion-barrel oil field since 1993. Tengiz is the republic's cash cow and one of the biggest investments in the former Soviet Union. ChevronTexaco owns half of TCO, ExxonMobil 25%, Kazakhstan state oil company Kazmunaigaz 20% and LUKArco 5%.

High-stakes game The advent of the Caspian Pipeline Consortium oil pipeline, which came into service last summer and is the first large-diameter pipeline carrying oil out of the area, has increased the stakes.

The lack of a pipeline previously limited exports, so there was no rush to ramp up production.

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