SOCIETY AND SECURITY INSIGHTS

32 № 4 2020

 339,5 73:510

ANALYSIS OF THE ACTIVITIES OF EUROPEAN OIL

ANDGAS TNC IN CENTRAL ASIA

S.М. Nurdavletova, Zh.I. Zharmakhanova

L.N. Gumilyov Eurasian National University, Nur-Sultan, Kazakhstan

e-mail: saniyanm83@mail.ru, zhansaule94@bk.ru

DOI: 10.14258/ssi(2020)4-02

e article discusses aspects of cooperation in the oil sector of multinational

companies representing the interests of European Union countries. In the context

of the economic crisis, the impossibility of OPEC + to regulate oil prices and the

volume of its production, it is dicult to make forecasts of further economic coop-

eration. e coronavirus pandemic has shown that, contrary to the interests of glo-

balization, national economies must remain self-sucient. In our opinion, in the

future, the legal regime for the presence of multinational companies in the interests

of national economies will be revised.

e Energy Charter of 1991, depriving the Central Asian countries of the right

to judicial protection, the oil economic crisis will lead to a severe crisis in the oil

sector. e geopolitical confrontation between Russia and the United Arab Emir-

ates against the United States creates a new balance of forces that will aect the

development of the Central Asian direction of the European Union’s foreign policy

as the basis for energy security.

Keywords: multinational companies, European Union, Central Asia, analysis,

economy, crisis, legal regulation

АНАЛИЗ ДЕЯТЕЛЬНОСТИ ЕВРОПЕЙСКИХ

НЕФТЕГАЗОВЫХ ТНК ВЦЕНТРАЛЬНОЙ АЗИИ

С.М. Нурдавлетова, Ж.И. Жармаханова

   . .. ,

-, ,

e-mail: saniyanm83@mail.ru, zhansaule94@bk.ru

     

     -





-



      

-



№ 4 2020

-



        



-

-



Ключевые слова:  ,  , -

 , , ,  , 



e relevance of the research topic lies in the need to analyze the interaction of Eu-

ropean transnational companies in the Central Asian region. It is necessary to determine

the position of the eectiveness of economic cooperation, in the conditions of oil wars,

as well as the prospects for development or economic crisis. e entire system of the oil

market, which has existed since the formation of OPEC since 1960, which allows exporting

countries to control oil prices, including regimes for limiting its production, turned out to

be unable to fully control prices. Such a shock state in the oil market as the state on April

20, 2020, when 1 barrel of WTI crude oil cost minus $ 37.63, has never happened in histo

ry. Perhaps this is due to the COVID-19 coronavirus pandemic, which hit all countries, led

to rigid self-isolation and a crisis in the economy of the whole world.

Due to the decrease in demand caused by the pandemic, and consequently the sur

plus of oil, there is a stagnation of “black gold” in storage facilities. According to the US

Energy Information Administration (EIA), as of April 10, storage facilities at America’s

largest oil hub in Cushing, Oklahoma, were 72% full (Manukov, 2020). In addition, there

is a possibility that this is collusion of individual oil companies. For example, D. Medve

dev, Deputy Chairman of the Russian Security Council, believes that everything that we

observe in relation to oil futures contracts is very reminiscent of a cartel conspiracy. In his

opinion, the situation requires “the most careful analysis, since it undermines the recovery

of the world economy” (Vedomosti, 2002).

e aim of the study is to determine the degree of in uence of the current economic

situation in the oil market on the dynamics of relations between transnational corpora

tions of the European Union countries in Central Asia in the oil and gas sector, more

precisely, how the current stagnation will aect European transnational companies in the

Central Asian region.

e hypothesis of this study, which requires proof, is to determine the preservation

of the positions of European transnational companies engaged in the development of oil

and gas in Central Asia during the period of oversaturation of the oil market.

e main thesis to be defended is the provision that European multinational compa

nies operating in Central Asia will be interested in preserving their assets in the rst place,

and not in preserving the economic stability of the countries in which they are located,

which will lead to changes in legislation in relation to them. , that is, the legal regime of the

SOCIETY AND SECURITY INSIGHTS

34 № 4 2020

presence of transnational companies in the world will be revised in the interests of national

economies.

Activities of European TNCs in Central Asia. According to the denition of G.M.

Velyaminov, transnational companies (TNCs) are a set of various independent organiza

tions united by one economic goal, located in dierent countries and controlled from a

single center (Velyaminov, 2004).

Central Asia plays a critical role in the global energy security system, because it

possesses huge reserves of oil and gas, and because most of its resources are available for

development by foreign companies (Roberts, 2020).

In Central Asia, Kazakhstan, Uzbekistan and Turkmenistan produce 11% of all oil

and 15% of gas in Eurasia. Kazakhstan occupies a leading position in the extraction of

crude oil, ¾ of which it exports. Uzbekistan is the leader in natural gas production. Turk

menistan extracts more gas by 7-10% than Uzbekistan, and sends up to 80% for export, the

share of Uzbek gas exports from the volume is 20% (CAA, 2020).

Such an important energy resource could not be ignored by foreign companies; not

only national companies of the region’s countries are involved in the production and trans

portation of hydrocarbons here, but also transnational companies from the USA, Russia,

EU countries, China, India, and the Middle East.

e volume of production can be judged only by one fact, in Kazakhstan TNK, in

2018 alone, they produced 90, 360 million tons of oil (Report of Kazakhstan’s Institute of

oil and gas, 2019).

Considering the analysis of proven and proven oil and gas reserves, as well as com

missioned and existing oil pipelines, Central Asia is an important segment of the world

energy system. e main consumers of Central Asian oil and gas are the EU and China.

e development of trade relations and the saturation of the EU market is due to the

fact that the main source of oil for Europe is the reserves of the North Sea, oil consumption

is growing, and its reserves are decreasing, this niche may well be occupied by oil from the

Caspian region.

at is why, in our opinion, European multinational companies are present in the

Central Asian region. Energy security is the most important factor in existence.

European TNCs operate in the region, such as Shell (Great Britain, the Nether

lands), Total (France), British Petroleum (Great Britain), Eni (Italy). It should be noted

that in addition to these companies, Chevron, Exxon Mobil (USA), Gazprom and national

companies of Kazakhstan, Turkmenistan and Uzbekistan also operate.

European oil companies entered the market at a time when the economies of the

post-Soviet states were in dicult conditions. e urgent need for investment at that time

forced the signing of international treaties. All potential risks were assumed by the host

countries, and investors received preferences.

It should be noted that the legal regulation of the relationship of European trans

national companies in the Central Asian region is quite specic. First, attention should be

paid to the essence of the Energy Charter, adopted at the Hague Conference on December

17, 1991. e content of the charter determined the prospects for investment relations. In

fact, given the norms of international law, based on the principles of precedent, this rule



№ 4 2020

must be followed, and restitution in this case is not possible. Under the charter, taris and

charges will be reduced and will be zero when non-WTO member countries join the World

Trade Organization. e host countries were given the opportunity to build transport lines

for hydrocarbons but did not have the right to judicial protection and had to modify their

national legislation in accordance with the ECT (Suleimenov, Papanasopulo, 2011).

Having received legal guarantees of positive participation, TNCs began to penetrate

the investment market of Kazakhstan. e EU has launched a Green Paper “A European

Strategy for Sustainable, Competitive and Secure Energy”. Exhausting their ecology and

diversifying the economy, they orient it, rst of all, to the management of oil production in

third countries (Makenova, 2018).

ere are many reasons why it was the Caspian oil that became the object of the EU’s

economic interests. Firstly, these are the terms of the Energy Charter Treaty; secondly, Ka

zakhstan, as the main oil supplier, does not have any potential crises in the oil sector, similar

to relations between Russia and Ukraine, and of course, a decrease in dependence on Russia.

A new stage in the legal regulation of oil production by European TNCs began in

2007. e Council of the European Union signed the document “European Union and

Central Asia: a strategy for the sake of common partnership”. e document covers issues

of creating an infrastructure for the oil market, information exchange, scientic coopera

tion and environmental issues.

Now, the European transnational companies Agip, Eni, Shell and the French compa

ny Total operate in the region. Let us take a closer look at the presence of European TNCs

in Central Asia.

Royal Dutch Shell’s interests in the Karachaganak block form a 29.25% stake, pro

duction per day is 393,000 barrels. e Kashagan project is owned by Shell for 16% - 370

thousand barrels. Its subsidiary Pearls PSC, where Shell owns 56% of the shares, is devel

oping the Khazar and Auezov elds in the Caspian Sea. e company also has 7.43% in

the Caspian oil pipeline connecting the Black Sea and the Caspian Sea. Eni S.p.A is a large

Italian oil exploration company. It operates in more than 80 countries around the world.

Operating prot was € 2.567 billion (Makenova, 2018: 474).

British Petroleum is the second TNC in Europe to transport oil. In 2009, BP an

nounced its withdrawal from the oil market of Kazakhstan, selling its assets to other actors

in the oil sector. Probably, the major focus of the company was placed on the production of

shale oil in the United States and Mexico.

TOTAL is a French multinational company, which is the fourth in the ranking of

oil sales, engaged in the development of oil elds. It entered the Central Asian market in

1993, owns 16% of assets for the development of the Kashagan eld. Aer the acquisition

of Engie, Total became the second largest company in the world, with a 10% global mining

market share (Total-Kazakhstan, 2020).

In Uzbekistan, focused mainly on cooperation with Russia, Japan, Malaysia, South

Africa and the European vector represented by Gas Project Development Central Asia AG

(Switzerland).

In Turkmenistan, which is one of the largest owners of gas reserves, Gas Project

Development Central Asia AG (Switzerland) oered its nancial assistance in the con

SOCIETY AND SECURITY INSIGHTS

36 № 4 2020

struction of the Trans-Caspian gas pipeline under the Caspian Sea, however, the terms of

participation do not suit the Turkmen side, therefore the terms of the contract are still on

development stage.

Each of the presented oil producing companies serves not only, exclusively, econom

ic interests, but also acts as an actor in the security of their national economies, performing

the functions of ensuring the lling of the domestic oil and gas market from Central Asia:

1. European multinational corporations are reducing the use of oil reserves in the North

Sea, which in the future will provide a reserve of hydrocarbons.

2. Reduce the degree of environmental pollution in the European region, thereby helping

to improve the quality of life of the population and exempting TNCs from high Europe

an taxes on the environment.

3. Develop the infrastructure for oil production in Central Asian countries, contributing

to the development of economies.

4. Invest in research and development of alternative energy sources, as they realize the

non-renewability of hydrocarbons.

5. Serving economic interests, European transnational companies form a system of more

simplied interaction than the functioning of national companies, in which the e

ciency of asset management and the development of relations is politicized and directly

dependent on long-term commitments made under government agreements.

Developing risk factors in its strategic plans, no European oil company could expect

such crisis phenomena that cannot be explained either by the Kondratyev Cycles or by

economic theories. e impossibility or strategic reluctance of Saudi Arabia and Russia to

return the economic world parity in oil prices is a factor of raw material oversaturation,

which is changing the system of world geoeconomics, where the United States is suering

a clear economic defeat.

It turned out that external and internal factors of contradictions between oil exporting

countries form the impossibility of agreeing on production volumes and pricing policy. On

the one hand, it looks like the consequences of a pandemic, where energy consumers, having

reduced capacity, provoked a surplus in the market and, naturally, following the law of supply

and demand, a price reduction. On the other hand, this fact has shown that oil is not such an

expensive resource, and so rare, since exporting countries are ready to sell it much less. It turns

out that the oligopolistic conspiracy did not take place, there was an overproduction of goods

(oil) and a recession began, leading to a crisis in the industry, and in national economies. e

inability to nd sales markets will lead to the need to mothball the elds, which requires signif

icant costs that companies will not be ready to make. e result of this situation may be, in our

opinion, either an attempt to regain control over the market within the framework of OPEC

++, or hyperin ation of national currencies, a global economic crisis, which, taking into ac

count the technology of modern production, will become more tangible than the crisis of 1929.

Despite the declared possible controllability of oil production processes by countries

within the framework of OPEC ++, one should not lose sight of a signicant factor: oil is

produced by oil, mainly multinational companies, which receive their prots from sales,

invest them in the development of oil infrastructure and pay taxes to states territory of

which they are located.





№ 4 2020

It is extremely dicult to understand the true volumes of damage to the economy

because the contracts concluded between the government and TNCs are classied infor

mation (Echonews, 2018).

We can only focus on the volume of extracted raw materials, while, without knowing the

terms of contracts, it will be impossible to calculate the net prot for deductions to the budget.

e diculty in regulating relations with transnational companies is that they have

neither a nancial nor a legal center, but they can manage nancial ows.

Among the multinational companies that are actively involved in the development

of oil in the Caspian zone of the Central Asian countries, they represent the interests of the

United States, China, the EU and other geopolitical centers. In particular, this interest is

not exclusively of an oil nature.

It can be concluded that despite the crisis in the economy, TNCs, including Euro

pean ones, operating in Central Asia, will retain their presence, since the crisis is a phe-

nomenon that is always passing, and it will be more dicult to enter the oil market later.

Likewise, the European presence in the region weakens Russia’s position in matters of in

 uence on foreign energy policy. It is clear from the text of the Energy Charter that the

national economies of the Central Asian countries will suer losses that cannot even be

partially compensated, since these are the conditions of the Charter. e severity of the

economic consequences, independent overcoming of the crisis, through the use of internal

reserves, aer the end of the crisis will lead to a revision of the provisions of the Charter

and a change in energy positions (Zonn, Zhiltcov, 2008).

e creation of an alternative to the dollar for mutual settlements between countries

is acquiring a new urgency.

БИБЛИОГРАФИЧЕСКИЙ СПИСОК

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Макенова А.Б. Республика Казахстан иЕвропейский Союз: характер иособенности

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Мануков С. У беспрецедентного обвала нефти есть простое объяснение. 2020. URL:

https://expert.ru/2020/04/21/ne/ (дата обращения: 21.04.2020).

Медведев назвал картельный сговор возможной причиной отрицательных цен

на нефть. 2020. URL: https://www.vedomosti.ru/politics/news/2020/04/21/828539-

medvedev (дата обращения: 21.04.2020).

Отчет по анализу отрасли, контракт KZSJ-1.1/CS-20-CQS Разработка профессио

нальных стандартов иотраслевых рамой квалификаций понаправлению «Разведка

и добыча нефти игаза» и «Транспортировка и хранение нефти игаза». АО «Ка

захский институт нефти игаза» 2019. URL: http://www.king.kz/backend/web/images/

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Робертс Д. Борьба заресурсы Центральной Азии. 2020. URL: https://www.bbc.com/

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SOCIETY AND SECURITY INSIGHTS

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Сулейменов М.К., Папанасопуло Г.А., Холланд У. Влияние договора кэнергетиче-

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история и современность. 2011. Т. 7. URL: http://zangerlf.com/ru/publications/216

(дата обращения: 22.04.2020).

Транснациональные корпорации добыли 90,360 млн тонн нефти в Казахстане

за2018 год. URL: https://ehonews.kz/transnatsionalnye-korporatsii-dobyli-90-360-mln-

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