TODAY.AZ / Business

Kazakh Parliament backs plan to boost domestic companies' stake in energy sector

09 February 2007 [15:33] - TODAY.AZ
Kazakhstan's Parliament on Friday backed a government plan to tighten control over foreign oil companies, increase state and domestic companies' assets in the energy sector, and limit foreign borrowing by Kazakh banks.

Prime Minister Karim Masimov told lawmakers that his government would work out "effective" steps to increase the share of Kazakh companies in the energy industry, which is currently dominated by foreign investors, according to the government's Web site.

He also said the government would tighten control over foreign oil companies' activities to make sure they use Kazakh energy resources "rationally," train Kazakh specialists and hire Kazakh contractors. Foreign oil companies would be subject to "all-round monitoring" by central and local authorities, he said.

It was not immediately clear what he meant by monitoring, or what form the increased controls would take.

Last month, Masimov accused unspecified foreign companies of "unsatisfactory" implementation of contracts, citing "extensions of the prospecting period, delays with the start of commercial extraction and raising costs."

Last year, Kazakhstan downgraded its long-term oil output forecast from 3 million to 2.6 million barrels a day by 2015 because of delays in the development of Caspian Sea fields.

Vasily Lukyanchikov, an independent oil expert, said the move sent an alarming signal to foreign investors — that the Kazakh government wants "to rewrite the rules of the game."

"The state has enough administrative resources to use as levers in squeezing foreign oil companies," he told The Associated Press.

He said the government appears to want to increase state revenues from the energy sector by buying shares in various oil projects with foreign involvement, as well as making foreign companies buy Kazakh services and hire local workers.

Free-market reforms and generous foreign investment in Kazakhstan's vast energy sector have made the country one of the most economically successful post-Soviet states, with annual economic growth of about 10 percent for the past several years.

However, analysts say the economy lacks transparency and is dominated by the less-stable raw materials sector.

Masimov also said his government would take "a harsh position" regarding banks' foreign borrowings, saying they "must not go over a certain line."

Rapidly growing Kazakh banks have been actively borrowing from various foreign financial institutions in recent years, increasing the risk of default in case of an economic slowdown.

The prime minister said the economy was expected to grow by between 7.5 percent and 8 percent annually over the next two years with per capita gross domestic product expected to reach more than US$8,900 (?6,800) by 2009. Inflation will be kept within 5 percent to 7 percent, he said.

The economy grew by 10.6 percent last year, according to the government.

Masimov's government plans to complete accession talks with the World Trade Organization this year. The Associated Press

/The International Herald Tribune/


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