Tag Archives: oil

Azerbaijan’s energy company restarts its platform

JULY 15 2016 (The Conway Bulletin) — Azerbaijan’s state-owned energy company SOCAR said that it had resumed operations at an oil platform badly damaged by a storm and a fire in December. SOCAR said that work at one of the 28 oil wells operated by Platform No. 10 in the shallow-water Guneshli field had restarted. 31 oil workers died in the storm on Dec. 11, the worst offshore accident at an oil platform for nearly 30 years.

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(News report from Issue No. 290, published on July 22 2016)

Oilfield in Kazakhstan issues bond

JULY 21 2016 (The Conway Bulletin) — Tengizchevroil (TCO), the Chevron- led consortium exploiting the Tengiz oilfield in western Kazakhstan, issued a $1b 10-year Eurobond with a 4% coupon, lower than previously forecast, RIA Novosti said. Earlier in July, TCO approved a $37b expansion plan, which will boost production at Tengiz by 45% by 2020.

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(News report from Issue No. 290, published on July 22 2016)

Energy company in Azerbaijan loses revenues

JULY 15 2016 (The Conway Bulletin) — SOCAR Trading, the Geneva-based subsidiary of Azerbaijan’s state owned energy company, posted lower revenues in 2015 and warned that it expected a $9m loss from debt accumulated by Samir, the operator of Moroccan refinery Mohammedia. A Moroccan court declared Samir bankrupt for piling up billions of dollars of debt. SOCAR Trading revenues were down 42% in 2015 to $22.65b.

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(News report from Issue No. 290, published on July 22 2016)

Stock market: Tethys Petroleum, Olisol

JULY 22 2016 (The Conway Bulletin) — Tethys Petroleum’s share price has fallen steadily in the past four months, as the Olisol share buy-in becomes a reality. This week it closed at 1.63p/share in London on Thursday, down 6.9% on the previous week.

The Guernsey-based oil and gas company operates chiefly in Kazakhstan and Tajikistan. In May it reached a final financing agreement with Kazakhstan-based Olisol, which is poised to buy a 42% stake in the company once the deal becomes concrete.

Last week, the company announced the appointment of a new Chief Commercial Officer, Kazakhstan-born Alexander Skripka, who is also a director and shareholder of Olisol.

Mr Skripka had previously worked for state-owned Kaztransgas, the main gas distributor in the country. The link with a state-owned company is perhaps a sign of just how embedded Olisol is in the elite circles of Kazakhstan’s oil and gas sector.

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(News report from Issue No. 290, published on July 22 2016)

Azerbaijan’s energy company production falls

JULY 18 2016 (The Conway Bulletin) — Azerbaijan’s state-owned energy company SOCAR posted a fall in oil and gas production data in June, in line with this year’s downward trend. In H1 2016, SOCAR produced 3.7m tonnes of oil and 3.2b cubic metres of gas, down 8.6% and 6.2% respectively. Sustained low oil prices, the sharp depreciation of the manat currency in December and a storm at a platform in the Caspian Sea which caused a fire and killed several people have all contributed to lower production.

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(News report from Issue No. 290, published on July 22 2016)

Kazakh energy company spat worsens

JULY 19 2016 (The Conway Bulletin) — In an increasingly vicious argument, Kazakhstan’s state-owned energy company Kazmunaigas accused independent directors of its London-traded upstream subsidiary KMG EP, of misrepresenting its position over a buy-out scheme it was trying to promote. Kazmunaigas’ letter, published by Kazakhstan’s stock exchange, said that its purchase offer for KMG EP’s GDRs still stands and that the independent directors had overesti- mated KMG EP’s operational performance.

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(News report from Issue No. 290, published on July 22 2016)

Turkmenistan reorganises its oil and gas ministry

JULY 15 2016 (The Conway Bulletin) — In a move that took observers by surprise, Turkmenistan abolished its oil and gas ministry which had, officially, run the most profitable economic sector in the country, part of a wider structural reform of the government.

At a cabinet meeting, President Kurbanguly Berdymukhamedov justified the move as an effort to improve management and governance systems n the energy sector.

Turkmenistan is considered an important stakeholder in the world’s energy nexus, and the move shook analysts. It holds the fourth-largest gas reserves in the world and exports gas mostly to China via pipeline. For over a decade, European and US lobby groups have pushed for a Trans-Caspian Pipeline to pump Turkmen gas to Europe. Turkmenistan is also building TAPI, a gas pipeline to export gas to India, via Afghanistan and Pakistan.

Simon Pirani, senior research fellow at the Oxford Institute for Energy Studies, said that aside from internal causes, which are hard to guess, a range of external factors could have played in Turkmenistan’s decision to reorganise its hydrocarbon sector.

“The continuing relationship with China, despite lower off-take of gas than Turkmen officials had hoped, the improved ties with Iran and the quite bad relationship with Russia could all be relevant factors,” he told The Conway Bulletin.

The change, however, is unlikely to shift the way that Turkmenistan does business, a system that revolves around the whims and decisions of President Berdymukhamedov.

“Companies and international organisations are aware that Turkmenistan is a centralised system,” Mr Pirani said.

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(News report from Issue No. 290, published on July 22 2016)

Boardroom battle for control of Kazakhstan’s KMG EP heats up

ALMATY, JULY 14 2016 (The Conway Bulletin) — Intensifying its fight for more control over its London-traded subsidiary KMG EP, Kazakhstan’s state-owned energy company Kazmunaigas increased by 14% its earlier buyout offer to minority shareholders and retracted demands to cut the company’s independence.

Under pressure to boost income from oil and gas sales, Kazmunaigas wants to increase its 58% stake in KMG EP. KMG EP’s assets are more profitable than the assets owned by Kazmunaigas.

The problem for Kazmunaigas, though, is that its initial buyout offer of $7.88/GDR met with strong resistance from independent shareholders at KMG EP last month. The increase to $9/GDR, which Kazmunaigas issued without an explicit explanation, also appeared to attract a withering response.

“An increase in the price of the Purchase Offer would not be consistent with the prior statements made by Kazmunaigas that it ‘is not seeking to acquire any significant additional holdings in KMG EP through this offer’,” the independent directors said in a note.

They accused Kazmunaigas of underhand tactics to try to force more control over KMG EP. Specifically, the minority shareholders rallied against a new corporate governance structure proposed by Kazmunaigas that would reduce independent control of KMG EP. Kazmunaigas wanted to impose a veto against the appointment of independent directors but has now dropped these demands.

The ongoing saga within the most powerful industrial structure in Kazakhstan acts as a rare window on Kazakhstan’s corporate governance culture after a series of high profile scandals ahead of planned new IPOs, including Kazakhtelecom, the state- owned telecoms company.

KMG EP’s GDRs have traded at between $6 to $9 in the past 12 months.

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(News report from Issue No. 289, published on July 15 2016)

Exports drop at Azerbaijan’s SOCAR

JULY 1 2016 (The Conway Bulletin) — In its monthly report, SOCAR said it cut its oil export by 10% in the first half of 2016, compared to last year. The company did not give a reason for the drop. Shipments via Turkey’s Ceyhan port, the terminal of the Baku-Tbilisi-Ceyhan pipeline, were 30% lower in June 2016 compared to last year. Shipments via the Supsa terminal in Georgia fell by 48% in the same month.

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(News report from Issue No. 288, published on July 8 2016)

Business comment: Contracts of the century

JULY 8 2016 (The Conway Bulletin) — After the fall of the Soviet Union, multinational oil companies flocked into Central Asia and the South Caucasus to strike new deals around the Caspian Sea.

Kazakhstan in 1993 and Azerbaijan in 1994 awarded two massive licenses to Chevron and BP respectively. Both contracts became known as “the contract of the century”.

They became the largest oil projects in Azerbaijan and Kazakhstan, both operated under Production Sharing Agreement schemes, which gave significant advantages to the multinational companies in recovering their initial capital expenditures.

In the new era of sustained low oil prices, however, the Azeri-Chirag-Guneshli (ACG) group of offshore oil fields in Azerbaijan has had a different fate from Tengizchevroil in west Kazakhstan.

Azerbaijan’s President Ilham Aliyev has repeatedly pushed BP and its partners to increase production and continue to invest in spite of lower returns. Since mid-2014, when oil prices started plunging, ACG’s output growth has been sluggish at best. Now a potential corporate war over ACG between BP and Exxon contrasts strikingly to the success story of Tengizchevroil.

After years of mulling over an expansion and balancing costs, the consortium decided to launch a $36.8b investment that will boost production by 2022. This is a relief for Kazakhstan.

Tengiz has one of the lowest production costs in the region, at around $5.3/barrel, which makes it an easy bet even when oil prices are so low.

After the hype of the 1990s, now it seems clearer which of the two really deserved to be called the “contract of the century”.

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(News report from Issue No. 288, published on July 8 2016)