Wikileaks: What the Chevron-Kazak Cellphone Row Reveals About Big Oil Overseas

A U.S. embassy cable released this week as part of WikiLeaks massive secret government document dump shows just how difficult it is for international oil companies to negotiate the political and culturally sensitive waters in emerging countries like Kazakhstan.

The cable, which was also reported in the Guardian, describes an encounter between Chevron (CVX) and KazMunaiGas' first vice president Maskat Idenov over a cell phone number back in 2008 that led to the expulsion of two executives -- Guy Hollingsworth, president for Chevron Eurasia, Europe and Middle East Exploration and Production, and James Johnson, strategic business unit managing director -- from a meeting.

Two excerpts from the cable:

Johnson told us later that the incident occurred at the end of a meeting that had gone generally well, and resulted from an innocent issue over the newly-arrived Johnson not having his cell phone number handy to exchange with Idenov. Idenov's version of the conversation was heavy with descriptions of Hollingsworth pounding on the table and Johnson slowly tapping a business card on the table while telling Idenov all he needed was his secretary's phone number. Idenov almost immediately sent a letter of protest to Chevron CEO Dave O'Reilly, and faxed (twice) a cc to the Ambassador.

What really appears to be at issue here is Idenov demonstrating that he, not Timur Kulibayev, is now the go to guy in Kazakhstani oil and gas. ... The ascendant Idenov appears determined ti show the international majors that they need to deal with him. In an early stage of the Kashagan negotiations, he tosses some less senior ConocoPhillips representatives out of a meeting to deliver the message that he should be dealing with the upper levels of KMG's corporate sponsors.

At first glance, it provides a powerful and entertaining lesson on international business relations. But it also speaks to the broader issue of energy resources and the plight of major integrated oil and gas companies.

Gone are the days of easy-to-access oil. Which leaves U.S. and international oil majors with these choices: Work in technologically complex areas like the deep waters of the Gulf of Mexico or offshore Brazil; in costly areas that have may serious future environmental complications, like Canada's oil sands; or in politically unstable regions that ooze with protectionist measures.

Chevron hasn't shied away from difficult political territories. The company, for instance, cast its lot with Hugo Chavez, Venezuela's unpredictable and foreign-business-hating president, while others like Exxon (XOM) have chosen to stay away since Chavez nationalized oil projects in 2007. Chevron's stomach for risk has paid off in Kazakhstan -- despite the cell phone flare up -- and in Venezuela, when it became the only U.S.-based company awarded a contract to develop heavy crude oil reserves.

Chevron, the first major Western oil company to work in Kazakhstan, holds a 50 percent stake in the Tengizchevroil (TCO), a company that operates the Tengiz oil field. Chevron also holds a stake in the country's second-largest producing petroleum reserve, the Karachaganak field, and in the Caspian Pipeline Consortium pipeline.

Photo from Flickr user Steven depolo, CC 2.0
Related: