Firms Often Find War and Debt Come With Rich Oil Patches

PROBLEMS in Yemen, Kazakhstan, and Nigeria show that the developing world continues to be a risky place for oil companies to work. But that does not stop them, notes Henry Schuler, director of the energy program at the Center for Strategic and International Studies (CSIS) in Washington.

``They've been through it in Iraq, Iran, Libya, and Angola. They've learned to cope,'' says Mr. Schuler, who was in Libya managing Texas oilman Bunker Hunt's interests when Muammar Qaddafi seized power in 1969. Oil companies are even returning to countries like Iran and Venezuela that once expelled them.

Over the weekend, hundreds of expatriate workers and dependents fled Yemen's growing civil war. The country was formed in 1990 out of the merger of conservative North Yemen and socialist South Yemen. However, ``both factions wanted dominance. The issue was never resolved,'' says James Placke, an expert on the Middle East who is a director of Cambridge Energy Research Associates, in Cambridge, Mass..

Exxon Corporation and Hunt Oil Company of Dallas produce more than 180,000 barrels per day of oil in the north. Canadian Occidental Petroleum Ltd. of Calgary produces the bulk of the south's output of 150,000 bpd. Operations continue for now, the companies say.

In Kazakhstan, Chevron Corporation of San Francisco will have invested $1 billion in the giant Tengiz oilfield by year-end. The field could someday produce 700,000 bpd, but that requires construction of an export pipeline.

Chevron and a pipeline joint venture that includes Kazakhstan are ``pretty far apart'' in negotiations over financing, ownership, and guarantees, says Espy Price, vice president of Chevron Overseas Petroleum Inc. Robert Ebel, a senior associate at CSIS, nonetheless predicts a deal will be struck. ``You don't walk away from as much oil in the ground as you have at Tengiz,'' he says.

Chevron currently produces half as much oil from Tengiz as planned because Russia has restricted transshipments through its territory. Conventional wisdom is that Russia does not want its neighbor ``to become fat and happy and wealthy,'' an American living in Kazakhstan says.

In Nigeria, oil companies are owed $600 million by the government, which acts as a partner in their activities.

Brian Anderson, chairman of Shell Nigeria, says the debt to oil companies is beginning to ``severely limit'' oilfield investment and maintenance.

In addition, violence and sabotage in oil-producing regions are mounting. Shell Nigeria spends $18 million a year to hire 2,470 security guards - one for every two employees. For oil companies working in unstable areas, ``the risks come with the business,'' Schuler says.