Tag Archives: Kazakhstan

Kazakhstan threatens Karachaganak with fine

APRIL 4 2016, ALMATY (The Conway Bulletin) — The Kazakh government said it was imposing a fine on the consortium operating the Karachaganak gas field in north Kazakhstan, a blow to the companies involved in the project and to corporate governance in the country.

According to Lukoil, one of the companies in the consortium, the fine amounts to $1.6b, potentially the largest-ever penalty imposed on an energy consortium in Kazakhstan.

The Kazakh government has not commented on the size of the fine.

Eni, Shell (through BG), Chevron, Lukoil and state-owned Kazmunaigas are all part of the Karachaganak consortium.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kazakh President visits Cuba

APRIL 2 2016 (The Conway Bulletin) – Kazakh President Nursultan Nazarbayev visited Cuba for the first time. The visit came shortly after Mr Nazarbayev’s trip to the US for the Nuclear Security Summit. In Cuba, Mr Nazarbayev met President Raul Castro and discussed bilateral cooperation and trade.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Business comment: Panama’s Pandora’s Box

APRIL 8 2016 (The Conway Bulletin) – The leaking of millions of documents from the Panama-based law firm Mossak Fonesca, dubbed the Panama Papers, hit the headlines this week both for the number of secret documents it disclosed and for the profiles of those involved in hiding money in offshore accounts.

For the Central Asia/South Caucasus region, one important story is the large-scale involvement of the Azerbaijani Presidential family in the country’s gold business.

Investigations on the awarding of the Chovdar project contract to a consortium of offshore companies had already unveiled that Ilham Aliyev’s family was behind Globex International, which owned 11% of the venture.

The latest leaks, though, showed that Mr Aliyev’s daughters, Leyla and Arzu, in fact, also owned Panama-registered Londex Resources, which owned another 45% of the project.

This makes the presidential family the majority owner, with a combined stake of 56%, of a project that holds gold reserves previously valued by the government at around $2.5b.

Other important figures from the South Caucasus and Central Asia, such as Georgian billionaire and former PM Bidzina Ivanishvili and Nurali Aliyev, grandson of Kazakh President Nursultan Nazarbayev, were also revealed to have hidden money in offshore accounts.

But this, although morally questionable, is not an illegal practice.

What is suspicious, and unfair, is when the Azerbaijani government awards the Presidential family’s unknown offshore companies a very favourable gold contract.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Subsidiary of Kazakhtelecom stops unlimited data

APRIL 7 2016 (The Conway Bulletin) – Altel, a subsidiary of state-owned Kazakhtelecom, said it would phase out its unlimited data package because of lack of network capacity during peak hours. The measure came as a surprise for customers, who turned to online forums to complain. The telecoms market in Kazakhstan is very competitive and companies are seeking new ways to boost revenues. Altel is 49% owned by Tele2 and 51% by Kazakhtelecom.

ENDS

(News report from Issue No. 275, published on April 8 2016)

UAE extradites Alimbetov to Kazakhstan

APRIL 5 2016 (The Conway Bulletin) – A court in the UAE extradited to Kazakhstan Mirkhat Alimbetov, former head of Kakadu, a construction company accused of embezzling around $3m from government tenders. Mr Alimbetov is now being held in a prison in Astana before his trial. He has been on the run since 2009.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kazakhstan hits Karachaganak consortium with $2 billion fine

ALMATY, APRIL 4 2016 (The Conway Bulletin) — The Kazakh government has filed a $1.6b fine against the consortium that operates the Karachaganak gas condensate field in northern Kazakhstan, Russian energy company Lukoil said, sparking fears about corporate governance and contract sanctity.

If the fine was enforced it would be, by far, the largest-ever penalty imposed on an energy consortium in Kazakhstan

Lukoil said that the lawsuit concerned changes to the profit scheme of Karachaganak’s production sharing agreement contract.

“Lukoil is involved, along with other Karachaganak consortium members, in a dispute with the Republic of Kazakhstan regarding the calculation of both cost recovery and an equity index in accordance with the Karachaganak production sharing agreement. The share of the total fine Lukoil will have to pay is $214m (15.6b roubles),” the company said in a statement.

Essentially, the fine focuses on when exactly the partners at Karachaganak have earned back their initial investments and how the equity stakes are divided. Once Karachaganak has paid back the initial start-up investment it shifts onto a higher tax regime. The Kazakh government wants this to happen soon, especially as it is trying to battle its way through a sharp economic downturn.

None of the other consortium members have commented. They are Eni (29.25% stake), Shell (29.25% through BG), Chevron (18%), Lukoil (13.5%) and state-owned Kazmunaigas (10%).

Analysts say the fine was consist- ent with the government’s practice of pressuring business ventures.

“Kazakhstan’s government has repeatedly tried to exert pressure on and expand its presence in Karachaganak, which is a profitable project. This fine is in line with the government’s strategy of increasing state shares in profitable projects,” said Nygmet Ibadildin, professor of energy policy at KIMEP University.

In 2012, Kazmunaigas bought its 10% stake in Karachaganak for an undisclosed amount. Shortly after this deal, Kazakhstan dropped a two year long $1.2b tax-back claim against the consortium. Many analysts linked the two issues.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Inflation climbs in Kazakhstan

APRIL 1 2016 (The Conway Bulletin) – In March, consumer prices continued to increase in Kazakhstan, according to the National Statistics Committee. Inflation stood at 0.5% in March alone and the annualised level now stands at 15.7%, its highest since 2009. Analysts have said that inflation in Kazakhstan will continue to climb.

ENDS

(News report from Issue No. 275, published on April 8 2016)

EEU reschedules meeting due to Armenia-Azerbaijan fight in N-K

APRIL 6 2016 (The Conway Bulletin) – The Eurasian Economic Union moved a meeting of its PMs scheduled for April 8 in Yerevan to Moscow because of fighting between Armenia-backed fighters and Azerbaijani forces over the disputed region of Nagorno-Karabakh. Before the meeting was moved, Kazakh PM Karim Massimov had cancelled his trip to Armenia’s capital. The Moscow meeting will now be held on April 13.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kashagan opening gives impetus to Kazakhstan

APRIL 5 2016 (The Conway Bulletin) – The Caspian Pipeline Consortium (CPC) which operates a pipeline that pumps oil around the northern shore of the Caspian Sea said it will ship oil from Kashagan in the fourth quarter of the year. The CPC statement gives extra impetus to the Kazakh government assessment that the Kashagan project will be operational by the end of 2016. Kashagan, which was supposed to propel Kazakhstan into the Premier League of oil producers was closed in 2013 for repairs.

ENDS

(News report from Issue No. 275, published on April 8 2016)

KazTransOil revenues grow in Kazakhstan

APRIL 1 2016 (The Conway Bulletin) – KazTransOil, Kazakhstan’s state owned pipeline distributor, said its revenue grew 3.2% to 213b tenge ($617m) in 2015. In US dollar terms, however, the company’s revenues shrank by around 30% due to the sharp depreciation of the tenge last summer. Analysts forecast a decline in sales for KazTransOil in 2016, but the company hopes to boost its revenues in 2017 with the giant Kashagan project coming online.

ENDS

(News report from Issue No. 275, published on April 8 2016)