Fourth quarter results showed more bad news than good for Chevron, America’s second largest oil producer.
Even though the company boosted production at its fields in Nigeria and Kazakhstan as oil prices justified an output increase, the company’s Q4 profit dropped by 37% from the same period in 2008. That loss was attributed to losses in refinery operations.
Worse news for Chevron is developing now, because the government of Kazakhstan is essentially promising a reversal of its no-tax policy for foreign oil companies operating in that Central Asian nation.
Kazakh President Nursultan Nazarbayev said on Friday, January 29 that his country will establish a $90 billion fund with oil revenues by 2020. That money will be spent $8 billion per year on developing Kazakhstan’s industrial base, which would lead the country’s economy to be less reliant on oil revenues.
Good news for Kazakhstan’s economic diversification is bad news for Chevron, Exxon, Shell, and other majors.
Energy Minister Sauat Mynbayev put it pretty clearly on Tuesday, Jan. 26 when he said, "If we abandon tax exemptions for these three or four projects [Chevron’s Tengiz and one other unnamed project] … then of course that means only annulling them because it’s quite a radical review."
The first time I read that, I really did think it was a Chevron exec making that statement. The fact that Kazakhstan’s leadership is upfront about the changes it’s putting in place should send jitters through oil markets.
Production sharing agreements (PSAs) under which foreign oil companies operate in countries like Kazakhstan and Libya are the tenuous grip that those majors have on their operating costs on site.
Kashagan, Kazakhstan’s largest oil field where several companies both foreign and domestic have a stake, was the largest oil field find in 40 years, and changing the terms on which that abundant new supply is pumped could severely impact oil prices in 2010.