Kazakhstan's economy depends on energy, especially oil, and many of the world's biggest energy companies are active in the landlocked Central Asian country.

Foreign direct investment in energy accounted for nearly $4 billion since 1993 as a number of huge projects take shape, yet both Kazakh officials and foreign investors point to serious flaws in the business regime.

Head of Chevron's Eurasia business unit, the biggest foreign investor in some of the largest energy projects in Kazakhstan including the Tengizchevroil production venture and CPC pipeline, Nick Zanz, pointed to bureaucratic failings.

``There's a need for continued reduction in layers of bureaucracy in government, especially at the local level where jurisdictional overlaps often occur, increasing opportunities for corruption,'' he said.

He added that training for middle and low ranking government employees was needed, and said in some regions government staff needed training to help understand and implement new laws enacted to help develop the energy sector.

Head of Britain's BG plc David Varney said that the lack of a policy to develop natural gas resources and the need for more economic reform to cut costs and make an expensive region competitive were deterrents to investment.

Kazakh officials agreed there were shortcomings.

State oil company Kazakhoil's vice president Uzakbai Karabalin acknowledged Varney's criticism of the gas sector, and said it was ``no secret'' that the republic flared large volumes of gas as there was no other policy.

Acting finance minister Uraz Dzhandosov said legislation on use of the subsoil needed improvement, adding that a Foreign Investors Council had been set up last year specifically to allow investors to air grievances.

But despite the problems, interest in investing is high. Some of the world's most ambitious oil projects are under way in the newly opened oil province, only accessible to foreigners since independence in 1991.

Chevron, as part of consortia, is spending billions of dollars to develop the Tengiz field, with reserves of up to nine billion barrels, and to build a 1,500 km pipeline to move the crude to international markets.

In the shallow waters of the Caspian Sea, the OKIOC consortium is using new techniques to explore the offshore Kashagan field, which could be even larger than Tengiz.

OKIOC general manager Keith Dallard told Reuters on Tuesday that ``we're dealing with what's rumoured to be the biggest structure in the world.'' Some estimates put its reserves as more than three times those of Tengiz.

BG Plc itself, despite Varney's warnings, is committed with its partners to spending $2 billion over the next three years on the Karachaganak gas and condensate field.

Despite all the problems, Kazakhstan must be getting something right.

Delegates at the seventh Kazakhstan international oil and gas conference which opened on Wednesday were positive about Kazakhstan's willingness to negotiate with investors and to seek their views on how to improve conditions.

They spoke approvingly of its political stability and Chevron's Zana said the enduring rule of veteran president Nursultan Nazarbayev was the single most important factor for investment in the country.