Wrangling Kashagan

Surprising no one, it is now obvious that “environmental concerns” were not at the heart of the Kashagan dispute, but rather about Kazakhstan’s burgeoning oil nationalism. In this, they are not alone—most oil-rich countries are adopting some form of resource nationalism, from Venezuela to Russia.

Kashagan, however, is an interesting case. Most of the large multinational oil corporations have adopted a capitulation strategy, assuming that a slightly smaller piece of a functioning field was better than a bigger piece of a non-functioning one. Most them, except for ExxonMobil.

Kazakhstan on Tuesday exposed ExxonMobil as the only member of an international oil group led by Eni of Italy unwilling to surrender part of its equity in the giant Kashagan oilfield to KazMunaigas, the Kazakh state oil company.

“ExxonMobil does not share the opinion of other members of the consortium,” Sauat Mynbaev, Kazakhstan’s minister of energy, told reporters in Astana, the Kazakh capital.

Given every other company’s behavior, Exxon’s choice to try for the status quo is puzzling. As Steve LeVine explains:

Does Exxon Mobil know something that the rest of Big Oil doesn’t? Or is Exxon on a noble but ultimately quaint and quixotic quest for the old days?

It would be foolish to pass judgment on Exxon’s strategy. But it does seem to be betting the house against the tide.

That’s the question: why? Obviously, they think they can maintain current margins. But that simply is not how the world works anymore; too many of the countries they have actively antagonized over the decades have learned to fight back the only way they know how—nationalism. It would be a mistake, however, to view this as some sort of sinister movement. Rather, it is the essence of cause and effect: the oil companies caused so much anger and resentment through their exploitative relationships with impoverished but oil-rich states, they deserve very little of our pity when the tide goes against them.