Center Stage

ExxonMobil in Kazakhstan

How will Rex Tillerson's ExxonMobil connections affect US policy in Central Asia?

US Secretary of State Rex Tillerson speaks during a joint press conference with Chinese Foreign Minister Wang Yi. The US and China share significant interests in Kazakhstan.

“The only lens he [Tillerson] has looked at world affairs through for 40 years is ‘is it good for Exxon?” stated a former colleague in December.

While this attitude has caused great concern for many political observers, it might spell a bright future for Kazakhstan—a country rich in uranium, oil, and gas. While Kazakhstan might not be familiar to many US foreign policy observers, it is familiar territory for Tillerson. ExxonMobil has been operating in Kazakhstan for twenty years and is a major investor in both of its major oil fields.

In 2007 Tillerson was key to a successful deal to develop Kashagan, the largest oilfield in the country. The USD50 billion project had to balance the interests of six different companies as well as the Kazakhstani government. Conflicts between the government and the companies reportedly almost led the deal to collapse before Tillerson stepped up to the negotiating table. The resulting deal gave ExxonMobil control over drilling in the oil field.

ExxonMobil, in cooperation with Chevron and Russia’s Lukoil, also agreed to jointly invest around USD37 billion in Tengiz, another massive Kazakhstani oil field.

Kazakhstan itself is attempting to position itself as appealing to as many investors as possible. Its 76-year-old leader, President Nursultan Nazarbayev, has fostered strong relationships with both China and Russia, while at the same time managing not to antagonize the US or the European Union.

Starting on June 10, 2017 Kazakhstan will be holding an expo that will attempt to show how much the nation has advanced. Its exhibits will highlight energy initiatives and new construction materials.

Observers believe that through the Expo Nazarbayev is trying to signal to foreign investors that Kazakhstan is both stable and a fruitful place to conduct business.

In the past few years many investors were made wary by the length of time it took oil fields like Kashagan to start producing oil. Although large investments were poured into the field in 2007, it did not start producing oil until this year. Even though Kazakhstan sits on massive oil and gas resources—the second largest in the region after Russia—fear of mismanagement has kept some investors at bay.

Currently most inward investment in Kazakhstan comes from China. The World Bank predicts that Chinese investment in Kazakhstan will go from representing 0.9% of GDP in 2016 to 4% by 2019.

But Kazakhstan appears very willing to diversify its investors and Tillerson’s history shows that he is well aware of the value of the country’s resources. Significantly Kazakhstan has finally started exporting oil this year making it potentially more appealing to potential investors. The UK consulting firm Wood Mackenzie estimates that the country will produce around 154,000 bopd this year.

Another key change that Tillerson may bring to Kazakhstan is his affect on Russian sanctions. Tillerson has previously advocated for the lifting of economic sanctions on Russia. ExxonMobil has strong interests in the country. In 2013 Tillerson was awarded Russia’s Order of Friendship for the successful deals he had conducted with the country through ExxonMobil.

The sanctions, among other things, prevent partnerships between Russian and American oil companies, limiting potential partnerships in Kazakhstan where both Russian and American companies have significant interests. If the sanctions were lifted it could result in increased investment from both countries.

A shift toward Russia from the US could signal not only closer business ties between the two countries, but also an expansion of US business interests in many countries in the region. With Tillerson in office, Kazakhstan is a country to keep an eye on.

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