Why Did Lukoil Receive Projects in Kazakhstan Without a Competition?

If Russia’s Lukoil is forced to scale back its operations in Kazakhstan due to U.S. sanctions, the country may need to reconsider how investors are selected for major oil projects, Orda.kz reports.

Energy analyst Nurlan Zhumagulov shared his assessment on his Telegram channel Energy Monitor, suggesting that Lukoil’s potential withdrawal from the Kalamkas-Khazar project — where the Russian company holds a 50% stake.

If this were to occur, he believes it would be important to review the system that gives national companies priority rights in bringing in private investors.

Preemptive Rights

Zhumagulov notes that Lukoil entered the Kalamkas-Khazar project through this very mechanism, bypassing an open tender.

Owing to their preemptive rights, national companies became a 'passport' for private investors to enter without a tender. For example, the Italians (Eni) and the Chinese wanted to participate in the Kalamkas-Khazar project, but Lukoil was chosen without a competitive bid. Shell, which spent $900 million on the Khazar project, was outraged that it was not offered the terms of an improved model contract or a choice of offshore platforms,
 the analyst wrote.

A New Model?

The expert argues that the current model — where KazMunayGas (KMG) and QazaqGaz have priority in selecting business partners — is outdated.

It allows state corporations to secure key fields while choosing their partners without transparency.

National companies need to be brought to a full IPO (not a 5% stake, as with KMG), stripped of their preemptive rights. Let them compete on the open market. We need to create an entirely new instrument, following Norway's example — a 'direct financial interest of the state,' where the state itself enters the project as a passive partner (without operatorship),
 Zhumagulov suggested.

The expert points out that similar examples already exist — the use of funds from the National Fund to buy out shares in national companies (such as Kazatomprom).

In his opinion, after the Tengiz contract is completed, the state could automatically be given a 49% stake in the project, with the remainder distributed among the partners.

Currently, KMG has a stake in the project, but the state does not receive 100% dividends from it.

Removing the preemptive rights for national companies and allowing them to go public will only be beneficial: it will reduce the social burden, as institutional investors and minority shareholders will prevent them from spending money on non-core projects. Remember the president’s order to KazMunayGas to build a sports complex in Oral for 16 billion tenge? Such maneuvers would be impossible for a fully public company,
 he wrote.

The Proposal

The analyst proposed that experts in the oil and gas sector form a working group to compile reform initiatives that could later be submitted to the Majilis and the Presidential Administration — particularly if Lukoil withdraws from Kazakh projects, opening the door for new investors.

Earlier, Orda.kz reported that major Chinese state-owned oil companies had temporarily halted purchases of Russian oil following new U.S. sanctions on Rosneft and Lukoil.

Original Author: Nikita Drobny