Kazakhstan threatened on Tuesday to rewrite key Western-run energy projects to implement new tax rules, in a move likely to send jitters among foreign investors operating in the Central Asian state.

The oil-rich Caspian nation has sought to raise its weight in the strategic energy sector dominated by Western majors, and raise fresh budget revenues through taxes and export duties.

Emboldened by its growing role as a leading regional energy supplier, Kazakhstan has long threatened to boost its role in the sector.

Addressing the lower house of parliament, Energy Minister Sauat Mynbayev said projects such as the Chevron-led (CVX.N: Quote, Profile, Research) Tengiz oilfield, as well as Karachaganak and Kashagan would be affected as a result.

"If we abandon tax exemptions for these three or four projects ... then of course that means only annulling them because it's quite a radical review," he said, without naming the fourth project.

Under current rules, most Western energy majors working in Kazakhstan under production-sharing agreements are not liable to changes in the Central Asian country's tax legislation.

President Nursultan Nazarbayev said this month that foreign projects in industries such as oil and gas should lose their immunity from changes in tax legislation. [ID:nLDE60L16O]

"It's not an easy question. Of course there is an order so we will (implement) it," Mynbayev told members of parliament.

"Abandoning tax exemptions is a big question. We will separately discuss ... how we will implement it through concrete steps, taking into account the (president's) order."

The three Western-led groups declined immediate comment.

Boosting state influence in the strategic sector has political connotations in a former Soviet country where ordinary people have long accused the government for selling out its natural resources to Western multinationals.

Its grip on power shaken by the economic crisis and a tide of public frustration with falling incomes and stalling economy, the government is keen to showcase its resolve to put key industries under firm state control.

"For the first time the government has shown a very clear political will to review contracts, and look for new investors if (the current ones) do not implement our programmes," said Kenzhegali Sagadiyev, a member of parliament.


Kashagan -- the world's biggest oil discovery in decades -- is run by Exxon Mobil Corp (XOM.N: Quote, Profile, Research), ConocoPhillips (COP.N: Quote, Profile, Research), Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research), Eni (ENI.MI: Quote, Profile, Research), Total (TOTF.PA: Quote, Profile, Research), KazMunaiGas [KMG.UL] and Japan's Inpex Holdings Inc (1605.T: Quote, Profile, Research).

Karachaganak, at the centre of a separate dispute with the government over costs and other issues, is operated by a consortium that includes BG (BG.L: Quote, Profile, Research), Eni (ENI.MI: Quote, Profile, Research), Russia's LUKOIL (LKOH.MM: Quote, Profile, Research) and U.S. firm Chevon (CVX.N: Quote, Profile, Research).

Kazakhstan alarmed investors in 2007 when it accused the Kashagan consortium of violations in a dispute over costs and management. As a result, Kazakh state oil company KazMunaiGas ended up doubling its interest in Kashagan.

The latest row over Karachaganak, a gas field discovered in Soviet times and containing 1.2 billion tonnes of oil and gas condensate, erupted last year after the consortium accused Kazakhstan of levying extra duties on them.

Karachaganak operators sued Kazakhstan last year to recover over $1 billion in export duties and other payments but suspended legal proceedings in October. [ID:LDE60P030] (Writing by Maria Golovnina; additional reporting by Masha Gordeyeva)

ASTANA, Jan 26 (Reuters)


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