Concerns at Growth of Chinese-Owned Oil Assets

Members of Kazakstan’s parliament have expressed concern about the rising Chinese ownership of oil industry assets in the country. NBCentralAsia commentators say parliament is keen to ensure Kazakstan works with a diversity of oil investors, but they also suspect a degree of Sinophobia is at work.



Last week, members of the lower house of parliament, the Majilis, expressed concerns at the increase in foreign investment in oil and gas. Parliamentarian Valeriy Kotovich voiced particular worries at what he called the “aggressive” expansion of China. If the Chinese successfully conclude their negotiations to acquire Mangistaumunaigaz, which accounts for around seven per cent of total annual oil production, they will control close to 40 per cent of the oil extracted in Kazakstan, he said.



There is some substance to Kotovich’s claims. In late October, the state-owned China International Trust and Investment Corporation (CITIC Group) announced a deal to buy the Kazakstan oil assets of Canada’s Nations Energy Company. The principal asset is the Karajanbass field on the Buzachi peninsula in the Caspian Sea, with confirmed oil reserves of 53 million tons. The Kazak government will need to give its assent for the deal to go through.



China National Petroleum, another major firm which also took part in the bidding for Nations Energy, purchased the oil extraction company PetroKazakstan last year, and is currently the main supplier to the Atasu-Alashankou pipeline which has been carrying Kazak oil to China since the summer of 2006.



NBCentralAsia’s energy analysts identify several possible causes for parliament’s expressions of concern. First, the authorities may want an even spread of foreign investors, to avoid domination by companies from any particular country.



Second, a public mood of Sinophobia has recently become more prevalent in Kazakstan, so parliament may wish to be seen to be keeping an eye on the growth of Chinese influence. A third factor is that legislators want to change the state’s policy towards foreign investors in general.



Energy expert Yaroslav Razumov notes that the Kazak government now controls only 15 per cent of the oil extracted in the country. This is a result of policies that in the early days, led officials to use the arrival of foreign investors in the oil and gas sector as an indicator of success.



“The risk that China’s presence will grow to strong is real enough,” commented Razumov. “But it’s absurd to start a campaign against foreign investors regardless of whether they’re Chinese or not.”



Some observers say China’s growing strength in the extraction business should have been foreseen. After all, plans to increase throughput in the Atasu-Alashankou pipeline presuppose that China will work to find additional sources of oil. The current contractual arrangements provide only enough oil to run the pipeline at 30 per cent capacity.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)