Call the lawyers

Investors hate uncertainty, but that is exactly what they can expect in some hydrocarbons-rich provinces, where changeable fiscal regimes and political risks can easily derail the best laid plans. And when the ground rules change, investors run for cover, Martin Clarke reports

IN A LONG-TERM business, one where the cost of capital investment can easily stretch into billions of dollars, the need for certainty is paramount. No oil and gas firm will commit such large sums of money without a guarantee that its investment will be safe. When the ground rules change, however—suddenly and without warning—investors run for cover. Recent occurrences in Kazakhstan have done just that. Attempts by the government to muscle in on the giant Kashagan field, the impounding of a US drilling rig over alleged unpaid duties, and plans to raise tax on new oil ventures and install a pre-emptive rights clause on energy projects have rattled nerves in the former Soviet republic. The cumul