For January-September, KazMunayGaz racked up a $1.72 billion profit on revenue from sale of goods and services totaling $7.69 billion, up 13 percent from the same period in 2006. KazMunayGaz is projecting producing 17.162 million tons of oil and gas condensate this year.

KazMunayGaz is the national operator for the country's hydrocarbon exploration, production, refining and transportation. The joint stock company Kazakhstan State Asset Management Holding, or Samruk, controls the government's 100 percent ownership of the company's shares.

The Kazakh government established Samruk in January 2006 to improve the oversight and efficiency of its asset management. Samruk's establishment was a natural progression to bring accountability to Kazakhstan's thriving energy industry, which, like Russia, was increasingly perceived by the government to have been unfairly exploited in the immediate aftermath of the 1991 implosion of communism, when the Kazakh energy industry was still short of financing and expertise.

The tension is embodied in the development of the Tengiz oil field, estimated to be the world's sixth largest, with substantial reserves of natural gas, which has been developed by the Tengizchevroil joint venture since 1993. Tengizchevroil's major partners include Chevron, with 50 percent ownership, and ExxonMobil with 25 percent; the Kazakh government's share of KazMunayGaz was 20 percent of reserves estimated at up to 25 billion barrels.

A similar situation prevailed with Kazakhstan's offshore Caspian Kashagan Field, discovered in 2000. The North Caspian Sea Production Sharing Agreement operating Kashagan comprises seven companies: Eni, Shell, Total and ExxonMobil each held 18.52 percent, while KazMunayGaz held a paltry 8.33 percent.

The last several years have seen the Kazakh government adroitly move to rectify the situation by gradually increasing government control of the country's energy sector, and one of the main beneficiaries has been KazMunayGaz.

The first significant indication to foreign oil companies that the Kazakh government would attempt to rein in more of the immense profits generated by the oil-field developments was the 2004 introduction of a sliding scale progressive "rent tax" on energy exports that rose in step with increases in global energy prices, raising the government's share of oil income to a range of 65 percent to 85 percent, depending on world market prices. The Western oil companies were not happy but swiftly agreed to the changes.

The following year the government upgraded KazMunayGaz' status to contractor and stipulated it would control at least 50 percent of any new production-sharing agreement. Kazakhstan also amended the mineral subsoil laws to retain majority control of the country's oil assets along with broadening the government's ability to repurchase foreign-held energy assets deemed strategic.

As a result of the Kazakh government's hands-on oversight, KazMunayGaz has quickly grown over the last five years to include many subsidiaries including KazMunayGaz Exploration and Production, KazTransOil, KazTransGas, Kazmortransflot, the 104,400 barrel per day Atyrau refinery, Atyrau International Airport, the Eurasia-Air Helicopter Co. and KazTransCom Telecommunications Co.

Now talks are ongoing about the status of the foreign concessions at Kashagan, as the Kazakh government is concerned about negative environmental consequences of the development. Many cynical analysts have suggested a possible additional underlying factor is a desire on Astana's part to rewrite the percentages of the North Caspian Sea Production Sharing Agreement to favor KazMunayGaz.

Now KazMunayGaz is doing what any self-respecting energy company flush with cash is doing -- buying foreign assets. To give but one brief example: KazMunayGaz intends to borrow $3 billion to finance a 75 percent equity stake in Romania's Rompetrol, the nation's second-largest oil company with a 40-percent domestic market share. Underwriting the investment are ABN AMRO, Credit Suisse and Caylon, with KazMunayGaz acquiring its equity in Rompetrol from one of Romania's richest businessmen, Dinu Patriciu, who has received a portion of the money, with the remainder following after the European Commission approves the transaction.

As for the future, the sky is the limit for KazMunayGaz. Samruk chief Kanat Bozumbayev said that in 2008 KazMunayGaz plans to increase oil production by 14 percent. Even by Houston's standards, Kazakhstan's accomplishments in a half-decade are quite extraordinary and threaten foreign investors much less than Moscow's abrupt policies even as they protect the endangered Caspian seals and caviar-bearing sturgeon. Of course, if energy prices rise much further, there won't be many beside KazMunayGaz officials who can afford the processed salted roe.

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