Kazakhstan plays tough on oil

Kazakhstan will probably propose more talks over the giant Kashagan oil field after the deadline to find an acceptable compromise with a group of foreign oil companies expires at the end of this month. 

State oil and gas company Kazmunaygaz already has an 8.3% stake in the project, but wants more. President Nursultan Nazarbayev's promises not to annul the production-sharing agreement (PSA) governing Kashagan -- the fifth largest field in the world and the largest oil find in 30 years -- count for something: he made them after meeting Italian Prime Minister Romano Prodi. But major changes are inevitable. Kazakhstan is convinced that the current PSA terms, cost overruns and project delays jeopardise the country's long-term economic development. Encouraged by high oil prices and foreign governments’ desire to diversify away from Russia, it will take a tough line in negotiations. The November deadline may be missed but a solution is likely by the end of this year -- and it will be in Kazakhstan's favour.