Kazakh Oil: A War of Nerves

Russian brinkmanship could imperil the flow of oil and money across the Caspian to Europe

ASTANA – On the scorching, scrub-dotted steppe along the east coast of the Caspian Sea, a Chevron (CVX)-led team is opening up the taps on 50 new wells at the supergiant Tengiz oil field. Fifteen years after snagging rights to the Kazakhstan field, the U.S. oil giant is at last doubling production to 540,000 barrels a day, its largest single source of oil in the world.

Tengiz is a prize, and Chevron has spent bundles to secure it. In the nearby city of Atyrau, the headquarters and logo of Chevron’s joint venture dominate the skyline, while company townhouses in the city center include pools, a gym, and schools for the expat oilmen and their families. You would think Chevron’s victory in this remote oil patch was complete.


Yet getting the oil out of the landlocked country has always been a tricky affair: Russia has blocked, stalled, and restricted the flow of Tengiz oil through its territory since the first day Chevron took over the field. Teaming up with the Kazakhs, Chevron has resorted to shipping some of its oil across the Caspian Sea to Baku, the capital of Azerbaijan, and then via pipeline and railroad to Georgia’s Black Sea coast in an effort to avoid Russia. These days, Chevron does ship most of its oil through Russia, but for safety’s sake it hopes to build a long, new pipeline across Georgia and export more through that route.

EXPORT SETBACK

The plans for the corridor, though, were drawn before Russia’s summer romp through Georgia. Suddenly, that tiny Caucasian state