Oil history of Independence. The Beginning.
In autumn 2017, a book by Oleg Chervinskiy, a well-known journalist, analyst of the oil and gas industry, publisher of Petroleum Journal, "The Black Blood of Kazakhstan," dedicated to the 25th anniversary of the country's independence, was published in Kazakhstan. It is a live oil chronicle of 1991-2016, where there was a place for many participants and events. The book gives a holistic picture of the formation of the industry, with its heroes and antiheroes, big ambitions and no less big money, geopolitical games, and fights of "bulldogs under a carpet."
Today, on the eve of the 30th anniversary, Petroleum publishes an excerpt from a book about the events of 1991-92 – the first year of independence of Kazakhstan.
Parade of Sovereignties
The Soviet Union, which once inspired fear on half the world in 1991, increasingly resembles a colossus on clay feet. A parade of sovereignties is marching through the former empire's territory: before the creation of the State Emergency Committee (SCSE) in August 1991, Lithuania, Latvia, Estonia, Armenia, and Georgia had already declared state sovereignty. After the failure of the August coup, it becomes finally clear – the Union has died and is not subject to resuscitation. This is what the Supreme Soviet of the USSR formalizes de jure, adopting on December 26 the Declaration on the Termination of the Existence of the Union of Soviet Socialist Republics.
Kazakhstan is in no hurry to part with the Union. Only ten days before the fateful declaration, on December 16, in Alma-Ata, the Supreme Council adopted the Constitutional Law "On the Independence of the Republic of Kazakhstan." However, on August 31, according to the decree of President No. 410, all enterprises and organizations of union subordination of all branches of the national economy located on the territory of the Kazakh SSR are transferred to the jurisdiction of the state administration bodies of the Kazakh SSR, and their property becomes the property of the country.
From the secretaries of the district committee to the heads of the industry
On July 12, in Guryev (now Atyrau) on the shore of the Caspian Sea, a constituent assembly is being held to create a state corporation for the exploration, production, transportation, processing, and marketing of oil, gas, and petroleum products. It is attended by representatives of industry enterprises and heads of regional councils: Aktobe, Guryev, Kyzylorda, Mangistau, Ural, and senior officials of republican and union ministries and departments.
After a short discussion, the participants decided to establish the Kazakhstanneftegaz state corporation, whose President is Bulat Elemanov, an oil engineer who led the Tengizneftegaz production association and at that time the first secretary of the Embinsky District Committee of the Communist Party of Kazakhstan. Guryev was determined as the location of the board of the new organization.
The corporation's core is the Tengizneftegaz production association, operating at the Tengiz field in the Guryev region, which is unique in terms of reserves and quality of the oil. Since the beginning of 1990, during the "parade of sovereignties", Moscow has been trying to leave Tengiz, like other unique "oil pearls", in the orbit of its influence. In return, it offers regional elites who are showing teeth other, not so valuable assets.
However, the Kremlin underestimates the potential of the protest movement in the republics. At the initiative of public organizations and under pressure from informal leaders of labor collectives, the heads of oil and gas producing associations of the Guryev region send a letter to the Chairman of the Supreme Council of the Kazakh SSR, the Head of the Cabinet of Ministers of the Republic, as well as the Minister of Oil and Gas Industry of the USSR. The letter harshly criticizes the concept adopted by the Union center: "The proposal of the Ministry of Oil and Gas Industry of the USSR (MOGI) to subordinate Tengizneftegaz directly, bypassing the Kazakhneft national concern, which will include unpromising, economically unprofitable oil-producing associations, is unacceptable. The proposal of MOGI to subordinate Tengizneftegaz to itself is dictated by the desire to become the sole owner of a unique field located on the territory of the Kazakh SSR. The state of the subsoil and the social conditions of the areas inherited by the indigenous population are in an extremely neglected state. When adopting the concept of the MOGI, there is not the slightest doubt that Tengiz will face the same fate."
On August 16, 1990, in Alma-Ata, the First Deputy Chairman of the State Planning Committee of the Kazakh SSR, V. Ladygin, holds a meeting, the result of which is the decision to establish the Kazakhstanneftegaz state corporation, which was formalized de jure a year later in Guryev.
Although the oil and gas corporation was created on paper, by the time of the collapse of the Soviet Union, the industry consisted of disparate and completely unrelated production associations, three oil refineries and two pipeline departments engaged in oil transportation, and pieces of the former unified Soviet gas supply system. All of them are coordinated by different Union ministries and departments in the interests of the Union center. For example, the oil produced at the Aktobe fields is pumped in full to Russia, to the Orsk refinery, but the Pavlodar refinery entirely depends on the supply of raw materials from the West Siberian fields. Which suddenly are now abroad.
In the conditions of independence, Kazakhstan will have to solve all issues, starting with financing, design, logistics, supply of spare parts, scientific and technical developments, the introduction of new technologies, ending with the sale of products independently. An illustrative example – after the collapse of the Union, 60% of engineering products for the production, processing, and transportation of oil and gas are produced in sovereign Azerbaijan, the remaining almost 40% in no less independent Russia. In Kazakhstan, absolutely nothing is made for the renewal of fixed assets in the oil fields, and everything needs to be imported from outside. And the equipment available at the old fields is worn out, requires repair and replacement.
But the first question is where and to whom to sell oil to get money for it? Previously, it was simple. Almost all the extracted raw materials were handed over to the Atyrau-Samara oil pipeline system, and then Moscow solved all the issues of its sale. Now what to do with oil not to stop the pumping? It was necessary to look for buyers, negotiate pumping, conclude equal contracts with independent states that appeared instead of the USSR and with foreign countries.
It is necessary to create a new regulatory framework that would ensure the functioning of the industry and the arrival of foreign investment in it. There is no appropriate legislative framework in the country that guarantees a return on investment with a profit. No government body could negotiate with investors and resolve issues arising in the course of cooperation. Elementary, there are no specialists who speak foreign languages in the field of business and have experience in conducting negotiations.
The first laws are the Law "On Foreign Investments in Kazakhstan," adopted on December 7, 1990, and the Law of December 15, 1990, "On the Basic Principles of Foreign Economic Activity of Kazakhstan." They are vital because Kazakhstan is now independently, without the participation of the Union center, negotiating with the American Chevron Corporation on the creation of a joint venture to develop the giant Tengiz field. Investments are also required by other fields that are on the verge of stopping due to the rupture of economic ties within the unified national economic organism of the USSR: Karachaganak, Uzen, Kumkol, Zhanazhol.