Pouring oil on three fires

By Wang Wenwen in Kyzylorda Source:Global Times Published: 2012-10-16 19:50:07

Kazakh oil workers employed by China Oil International Co. Ltd prepare to clean an oil derrick near Kyzylorda, Kazakhstan. Photo: Wang Wenwen/GT
Kazakh oil workers employed by China Oil International Co. Ltd prepare to clean an oil derrick near Kyzylorda, Kazakhstan. Photo: Wang Wenwen/GT
 

Two hours' bumpy drive from the nearest town is Kazakhstan's northern Kyzylorda region. Layers of white and grey overlap each other beautifully above the barren Gobi desert, but the only signs of human activity are drilling sites, oil derricks, and workers.

Life is risky here, not only because of the extreme weather that is commonplace in the region, but also because working here involves that most sensitive of resources: oil.

In 2007, a Chinese worker was severely beaten when he tried to stop local gangsters from stealing oil from the pipeline.

Nonetheless, foreign companies still invest here, with the country pondering to what extent it should embrace them.

Entangled dependence

Having broken from its past as a Soviet republic, Kazakhstan has become the most influential Central Asian country, thanks to its rich natural resources and minerals. The estimated volumes of the country's extractable oil and natural gas stand at about 5.3 billion tons, ranking ninth in the world, as Vice Minister of Oil and Gas Bolat Akchulakov pointed out at an economic forum held in the capital Astana in May.

However, over-dependence on oil and gas - gas, oil and metals make up two-thirds of Kazakhstan's exports - have left the Kazakh economy very vulnerable. In 2000, the rising price of oil and metal minerals helped its national GDP growth rise drastically from 2.7 percent to 9.8 percent and it maintained such levels of growth for a few years. However, in 2007, the world financial crisis struck, dropping growth to 3.2 percent in 2008.

"Political development is based on economic potential, which is gained through the market economy. It is not any secret that Kazakhstan is willing to use its natural resources during its transition period and redistribute proceeds into other branches of industry," Daria Muhamedjanova, a leading research fellow at the Department of Economy of the Kazakhstan Institute for Strategic Studies in Almaty, told the Global Times.

Due to the country's deep connection to Russia in many aspects such as language, culture and lifestyle, Kazakhstan used to rely on Russia's pipelines to export its oil. Russia has already included Kazakhstan in its much touted Eurasian Union and has invited it to get involved in hydropower projects in Kyrgyzstan, a move which could help Kazakhstan establish a larger footprint in Central Asia.

At the same time, Kazakhstan is trying to use its geopolitical importance to create more routes linking it to other countries and regions to export its oil. Seeing Kazakhstan as an island of stability, both China and the US have sought to become its partners. 

"The trend is that the development of the whole Central Asian region is based on the balance between the three powers. Before independence, it was natural that Russia played a significant role in Kazakhstan. But after 1991, Russia's presence dropped significantly. This situation of course tremendously favored China, particularly after 1995 when China elaborated its foreign policy more practically," Guizhahan Khajiyeva, a leading research fellow at the Asian-Pacific Department of the R.B. Silelmenov Institute of Oriental Studies in Almaty, told the Global Times.

Nonetheless, analysts remain concerned about the future of this diverse but prideful country after a tumultuous past.

"If we look at the lines of development of Kazakhstan with Russia on the one hand and with China on the other, the cooperation is mostly along the lines of natural resources. In the long run, the situation will harm the country," Khajiyeva said.

Big oil player

China's investments into the Kazakh economy have reached $16 billion. Among them, $12 billion have been loans at a considerably low interest rate, used for big projects such as infrastructure building, construction of oil and gas pipelines, as well as oil refinery upgrade projects, Kazakhstan's Ambassador to China Nurlan Yermekbayev told the press earlier this year.

China's cooperation with Kazakhstan in the natural resources field can be traced back to late last century. China National Petroleum Corporation (CNPC), the State-owned energy provider, entered a joint venture called CNPC-International Aktobe Petroleum in 1997.

Aktobe, a region in northwestern Kazakhstan, has become prime land for oil exploration. In 2005, CNPC acquired PetroKazakhstan for $4.18 billion, at the time the largest overseas acquisition ever made by a Chinese company.

Currently, around 20 percent of Kazakhstan's oil and gas exports are destined for China. Last year, the volume of oil exported reached 12 million tons and that of gas reached 3.2 billion cubic meters.

In experts' views, the economic presence of China in Central Asia, including Kazakhstan, is taking place much more intensely and rapidly than Russia's restoration of links to the region. Some view this speed as an example of China expanding its political leverage across Central Asia.

Zabihulla S. Saipov, a foreign and domestic policy analyst at the University of World Economy and Diplomacy in Tashkent, wrote in an commentary for Asia Times last month that China's presence in Central Asia and its desire to reach, exploit and transport resources back home was a necessary move for the country to meet the growing energy demands of its domestic development.

Nonetheless, some politicians in Kazakhstan don't see this as a sustainable situation as their country is trying to seek a balance among other countries.

"Kazakhstan maintains balanced interaction with all countries and cooperates with Japan, India, South Korea and Europe. Multilateral relations provide a balanced policy for the country," Kamal N. Birkhanov, a member of parliament in Kazakhstan, told the Global Times. "So we are not threatened by any single investment."

You can't please everyone

Though China seems to be offering what the country most needs - billions of dollars of investment in basic infrastructure and the energy sector as well as creating job opportunities for local people, overseas Chinese oil workers have to deal with political and economic risks in this resource-rich country.

CNPC has several projects across Kazakhstan. The Ai-Dan-Munai (ADM) project funded by its affiliated share holding company, China Oil International Co. Ltd, produces an average of 410,000 tons of oil annually in Kyzylorda where a green landscape stretches for miles. The oil is exported to China through the China-Kazakhstan oil pipeline that began flowing in 2009.

Abiding by the country's rules of foreign investment, Chinese companies have to employ mostly local citizens. The ADM project has a total of almost 400 employees but only 20 are from China, all of whom hold managerial positions. Besides keeping a watchful eye on daily oil production, Chinese staff also need to pay attention to the requirements of local employees.

The basement of the ADM project is a 1,000-square-meter area housing all the employees. Two or three workers live in a separate nine-square-meter room with television and access to the Internet.

Liu Jincheng, the project's manager, told the Global Times that the living conditions of Chinese and Kazakh employees are the same so as to ensure a sense of equality.

However, some differences remain. Kazakh employees work eight hours a day. After working for a month, they can enjoy a whole month off. This is a treatment that the Chinese managers can only dream of as they do not even have fixed working hours. 

"No matter what happens and when it happens, we need to be there. Every minute is working time," said Liu.

Even so, doubts and hostility among the Kazakh community are not fully eliminated. Protests over salaries are constantly happening, both in Chinese and Western companies. 

At the end of last year, Kazakh oil workers held demonstrations in the western city of Zhanaozen, asking an oil joint venture between China and Kazakhstan to raise salaries. The demonstration finally turned into a riot before being suppressed by the local government.

According to Liu, his project has witnessed several protests and management has learned to keep a lookout for any potential troubles, once tensions start brewing.

At the same time, Chinese companies need to mediate with different governmental organizations, such as the Kazakh mineral bureau, environmental protection bureau and anti-corruption bureau.

"The government has the right to inspect foreign companies which come to invest here, but some of them are just making excuses and asking for money," said Liu.

Meanwhile, they also have to watch closely for thieves who may collude with security guards to steal oil from pipelines. A 75 kilometer pipeline was once punctured with more than 300 holes, through which oil was siphoned off. According to CNPC staff, stealing oil has become quite the industry among some locals.

Hope remains

Li Yonghong, head of the Astana Branch of PetroKazakhstan Overseas Services Inc., the company bought by the CNPC in 2005, said Kazakhstan's investment environment remains generally good as it has successfully carried out some reform measures since independence after the collapse of the former Soviet Union.

"With oil prices rising, how to distribute its internal interests to different countries is a question for Kazakhstan. It's understandable that its government is fully aware of how to best maintain its national interests," said Li.

China's national resources strategy seems far from the minds of most overseas Chinese oil workers in Kazakhstan. What they are concerned about is the quantity of oil they export back to China, or their workload.

Life at the oil drilling base is boring. Most Chinese workers haven't been home for a long time.

He Jinbo, an employee on the ADM project, has postponed his plan to meet up with his wife back in China several times due to urgent problems at the oil project. However, despite a dull life in Kazakhstan, the oil life is all they know and the Chinese employees even doubt whether a proper position or career is waiting for them back home.



Posted in: In-Depth

blog comments powered by Disqus