Kazakhstan, Russia End Oil Deal Dispute

Russia and Kazakhstan signed an agreement Saturday giving private oil companies from Russia and the West part-ownership of a planned pipeline through the two countries, ending a deadlock over who will transport oil from one of the world’s richest untapped fields.

The deal clears the way for a group led by Chevron Corp. to tap the Tengiz field in Kazakhstan and its 6 billion barrels of proven crude reserves under a 1993 contract worth $10 billion, the biggest ever signed by a private company in the former Soviet Union.

In a dispute that came to symbolize the frustrations of private investors in the former Soviet Bloc, Chevron’s oil deal had been delayed by a conflict over construction of a pipeline from Tengiz to Russia’s Black Sea port of Novorossiysk.

At the center of the conflict were Oman Oil Co. and its chairman, Dutch oil trader John Deuss, who with Russia’s backing had proposed building and managing the $1.2-billion pipeline. The governments of Oman, Russia and Kazakhstan all have a stake in the venture, the Caspian Pipeline Consortium.

Chevron, backed by the U.S. government, objected to any involvement by Deuss, who in the 1970s and ‘80s shipped oil to South Africa around a U.N.-approved trade embargo and who had sparred frequently with Chevron over transit fees. In an effort to force him out, Chevron had halted its Tengiz development.

The deadlock was broken in negotiations last month when Russia dropped its support for Deuss. After having difficulty raising money for the project, Deuss ceded operational control of the planned pipeline to Russia’s state-owned Transneft company.

Under the new agreement, the stake of private companies--led by Russia’s Lukoil with 12.5%, Chevron with 15% and Mobil Corp. with 7.5%--in the consortium was increased to half, while the Russian government’s share was cut to 24% and Kazakhstan’s to 19%.

Oman’s share was reduced to 7%. Russia’s Interfax news agency said Oman might sell out and quit the project altogether.

Other private shareholders include British Gas, Italy’s Agip, Russia’s Rosneft and Kazakhstan’s Munaigaz and Oryx.

A protocol restructuring the pipeline consortium was signed Saturday by the energy ministers of Russia, Kazakhstan and Oman during a four-hour stopover by Russian President Boris N. Yeltsin in Almaty, the Kazakh capital.

Kazakh President Nursultan A. Nazarbayev called the deal “a historic economic agreement” for his Central Asian republic, which expects to produce and export up to 50 million tons of oil by the end of the decade.

“We have solved this problem at last,” Nazarbayev told reporters. “Work will begin to build the pipeline, and we hope its first stage will be completed in a year’s time and the entire project [in] 2 to 2 1/2 years. This will end all speculation about the transport of Kazakh oil.”

Yeltsin and Nazarbayev renewed their commitment to negotiate--with Iran, Azerbaijan and Turkmenistan--an agreement on the legal status of the oil-rich Caspian Sea, but they did not narrow their differences over its terms.

Russia and Iran insist that resources in the sea should be divided equally among the five nations sharing its coastline, while the others claim ownership of resources lying in the sectors off their respective shores.

Despite the lack of agreement, Azerbaijan has signed several contracts with Western and Russian companies to explore for oil off its Caspian coastline, which holds deposits rivaling the Tengiz field.