NOV. 5 2015 (The Conway Bulletin) – Photographs and anecdotal evidence from Uzbekistan showed that queues for petrol at service stations are growing longer and longer. A collapse in the value of the Uzbek sum has hit the Uzbek economy hard. Uzbekistan also has a shortage of refining shortages.
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(News report from Issue No. 255, published on Nov. 6 2015)
NOV. 5 2015 (The Conway Bulletin) — Russian oil and gas company Lukoil completed the construction of two electric substations at a major gas field in Uzbekistan. Lukoil is the operating company at the Gissar gas field in the south of the country.
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(News report from Issue No. 255, published on Nov. 6 2015)
OCT. 22 2015 (The Conway Bulletin) — DEA Deutsche Erodel AG, a German oil and gas company, may be close to quitting Turkmenistan due to excessive bureaucracy, the exiled Alternative News Turkmenistan website reported. Lengthy custom clearance periods and slow licensing processes were the main complaints. The company has not commented.
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(News report from Issue No. 254, published on Oct. 30 2015)
ALMATY, OCT. 27 2015 (The Conway Bulletin) — The Kazakh government is considering levying a heavy fine against Karachaganak, Kazakhstan’s largest gas field, worrying observers who said this could mean a revival of resource nationalism.
According to sources quoted by Bloomberg News, the Kazakh government is likely to impose a penalty against the consortium operating Karachaganak for as much as $2b, in an attempt to earn quick cash for its crisis-hit state budget.
The sources, described as being familiar with the project, said the fine was for failing to meet contractual obligations.
A $2b fine would be the largest-ever penalty imposed on an energy consortium in Kazakhstan, exceeding a 2014 fine on Kashagan of $737m and a 2007 claim on Tengiz for $609m. British BG Group and Italian Eni own 29.5% each. Chevron and Lukoil are the smaller shareholders with 18% and 13.5% respectively. State-owned Kazmunaigas bought a 10% stake in the project in 2012, after a two-year tax dispute.
BG Group, Eni, Kazmunaigas and the Kazakh government all declined to comment.
The Bloomberg story hinted at resource nationalism, said Lawrence Markowitz, professor of Political Science at Rowan University.
“Contestation between Kazakhstan’s government and multinational corporations centres on contracts and this could be a case of a government using fines and penalties to be more predatory on the wealth these deposits generate,” Mr Markowitz told the Bulletin.
Other observers said Kazakhstan may be positioning itself ahead of a contract renegotiation.
“There is certainly pressure in Kazakhstan to change the Production Sharing Agreement contracts signed in the 1990s, because they were too generous for foreign companies,” said Nygmet Ibadildin, professor of Energy Policy at KIMEP University.
Shell agreed to buy BG earlier this year but speculation has mounted that Kazakhstan could exercise its preemptive rights to jump in and buy BG’s share.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 27 2015 (The Conway Bulletin) — Hit by delays in infrastructure maintenance, London-listed Nostrum Oil & Gas reduced its production target for 2015 by 9% to 41,000 barrels of oil equivalent per day. In its Q3 statement, Nostrum said repair work at a Kazakh state-owned gas export pipeline was now complete and production was back to normal.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 27 2015 (The Conway Bulletin) – Samruk-Kazyna, Kazakhstan’s sovereign wealth fund, signed a five-year loan agreement for up to $1.5b to help fund its purchase of a 8.4% stake in the Kashagan oil field. Kazmunaigas, Kazakhstan’s state-owned energy company, agreed earlier this year to sell half its 16.81% stake in Kashagan to Samruk–Kazyna. The manoeuvre is considered a mechanism to help Kazmunaigas raise funds during this period of depressed oil prices.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 30 2015 (The Conway Bulletin) — The US Federal Reserve Bank’s hinted that interest rates could be increased in December, hitting stock markets worldwide. South Caucasus- and Central Asia-related shares were no exception.
Miners were hit badly. Kyrgyzstan- focused Centerra Gold saw its shares lose over 9% in Toronto this week, closing at 7.36 Canadian dollars on Friday.
KAZ Minerals shares were also down 9%, closing at 116p on Friday.
After announcing it would pay a dividend to its shareholders on Oct. 30, Central Asia Metals reversed a slow start and closed on Friday, with a marginal positive growth, at 163p/share in London.
Oil and gas producers also suffered, despite oil prices gaining 2% this week with Brent crude closing at $49.5/barrel. Kazakhstan-focused Tethys Petroleum and Nostrum Oil & Gas both lost around 10% this week.
After reaching an 8-month high at £21.35/share last Friday, London-listed Bank of Georgia fell by 6.5% to £20.00. Last week its shares rallied after a healthcare group it holds a large stake in announced an IPO price range that valued the company at around $500m.
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(News report from Issue No. 254, published on Oct. 30 2015)
OCT. 16 2015 (The Conway Bulletin) — After a lengthy legal spat, Kazakhstan’s oil pipeline company KazTransOil (KTO) liquidated Batumi Terminals Ltd, its subsidiary in Georgia. Earlier in March, a Georgian court seized Batumi Terminals’ assets on charges that it had abused its monopolistic position. The charges were eventually dropped.
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(News report from Issue No. 253, published on Oct. 23 2015)
OCT. 23 2015 (The Conway Bulletin) — Oil companies suffered from a fall in oil prices this week. The Brent index closed at $48/barrel on Friday, down 5% this week.
Nostrum Oil & Gas lost around 9% this week, recovering on Friday to end at 475p per share in London. Nostrum’s summer objective Tethys Petroleum continued its slump, reaching the lowest level in 2015 on Oct. 22, trading at 0.06 Canadian dollars per share in Toronto on Thursday, rebounding slightly to 0.07 Canadian dollars on Friday. Kazakhstan-focused Roxi Petroleum gained 2%, after it issued new shares earlier in October. Roxi closed at 9.63p on Friday.
Last week, the price of copper fell by 2% before recovering to $2.40 per lb. Britain-based miner KAZ Minerals was hit by the market crunch this week and recorded a 7% loss, closing at 127p in London on Friday.
The upside was represented by Centerra Gold, whose shares gained almost 9% despite slower gold production in Kyrgyzstan. The final price in Toronto was 8.28 Canadian dollars.
In the banking sector, Bank of Georgia rose by almost 7% this week to 214p. The stability of the lari currency kept the market optimistic.
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(News report from Issue No. 253, published on Oct. 23 2015)
ALMATY, OCT. 20 2015 (The Conway Bulletin) — Ratings agency Standard & Poor’s said it would exclude Kashagan, Kazakhstan’s biggest oil field, from its Kazakh economic forecasts because its start-up date was unclear.
The news is a setback for NCOC, the consortium developing the Caspian sea field, which includes Eni, Shell, ExxonMobil, Total, CNPC, Inpex and Kazakhstan’s state-owned company Kazmunaigas.
Karen Vartapetov, S&P’s associate director, explained.
“The project has been repeatedly delayed. We are no longer taking this oilfield into account in the rating procedures,” she said.
Operations at Kashagan begun, briefly, in September 2013, eight years behind schedule. Two weeks later a leaky pipe was discovered and operations were stopped.
The delay has been costly for NCOC, adding an estimated $4b to the current $50b cost of the project.
The Kazakh government and NCOC say commercial production at
Kashagan will resume in the second half of 2016. S&P has forecast a start date no earlier than 2018.
Rich with oil and gas reserves, Kashagan was poised to become the gem of Kazakhstan’s resource-based economy. But technical problems and low oil prices have meant this glittering prize has been delayed.
Over the past few years, international oil companies have quit the project. Now S&P’s decision not to include it in Kazakh econ forecasts further undermines its status .
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(News report from Issue No. 253, published on Oct. 23 2015)