Chevron reports that production at its Tengizchevroil (TCO) facility in northwest Kazakhstan is returning slowly to normal after local workers supporting antigovernment protestors disrupted rail shipments last week in the country’s oil-producing region of Mangastau in the far western part of the country.
The protests over the government’s doubling of LPG (liquified petroleum gas) prices began just after the new year in the town of Zhanaozen, a 2-hour drive inland from the Caspian Sea port of Aktau. The unrest quickly spread east to the former capital city of Almaty, now Kazakhstan’s banking center.
Aktau is Kazkhstan’s supply base for offshore activity, export logistics, and local operations headquarters for many international companies such as Schlumberger, Baker Hughes, Halliburton, and others.
Though TCO is the largest oil and gas facility in Kazkhstan and a major producer of LPG for the Caspian and Black Sea regions, 700 km farther north protestors from a local worker’s camp managed to disrupt logistics enough to cause Chevron to announce late last week it would be adjusting TCO’s production accordingly.
By Sunday, 9 January, though, Chevron, which holds a 50% interest in the TCO joint venture with minority partners ExxonMobil (25%), state-owned Kazmunygaz (20%), and Russia’s LukArco (5%), issued this statement: “TCO is safely and gradually increasing production to reach normal rates.”
LPG is used in the region as a cheap substitute for gasoline in motor vehicles as well as fuel for heating and cooking. The government’s decision to double its price ignited tensions that have simmered since Kazakhstan’s president of 30 years, Nursultan Nazarbayev, a former Soviet politburo member, passed the presidency to a handpicked successor, Kassym-Jomart Tokayev in the spring of 2020, but remained in power under the title, “Father of the Nation.”
Kazakhstan is a complex society ethnically and in terms of its power relations between competing clans—some which rule the country and some which are excluded from the power elite.
Last week’s unrest saw Tokayev act decisively to request peacekeeping troops from the Russia-led Collective Security Treaty Organization (CSTO) created in 1992 by Russia, Kazakhstan, Armenia, Kyrgyzstan, Tajikistan, and Uzbekistan, and to restore domestic price controls on LPG at least temporarily.
The government attributed the decision to raise LPG prices to rising gas prices and an electrical shortage cause by cryptominers who had relocated to Kazakhstan from China after a crackdown by Beijing.
As CSTO troops arrived, Tokayev also began quickly to clean house to avert what could have been a palace coup in the making, sacking the government and replacing the head of the National Security Committee with one of his own loyalists; Tokayev also removed Nazarbayev as chairman of the Security Council and assumed the role himself, according to eurasianet.org, published by Columbia University’s Harriman Institute.
During his 3 decades in office, Nazarbayev, who remains a powerful figure as “Father of the Nation” was largely responsible for having negotiated an independent path for landlocked Kazakhstan after the Soviet breakup, balancing its position between Russia to the north and China to the south by inviting in a “Who’s Who” of international majors to develop its oil and gas resources with presidential guarantees that investments would be protected.
To cite one example of how seriously both sides have taken this guarantee: In announcing its 2021 budget, Chevron said it was prioritizing Kazakhstan over the Permian Basin, earmarking capital investment first to finalize its $45-billion wellhead pressure management Tengiz expansion project where its share of production in 2019 averaged 290,000 B/D of oil, 419 MMscf of natural gas, and 21,000 B/D of natural gas liquids.
