Tag Archives: oil

Azerbaijan to finance new refinery in Turkey

MAY 17 2013 (The Conway Bulletin) — SOCAR, Azerbaijan’s state-owned energy company, said it would borrow $4b to part-finance an ambitious new oil refinery in Turkey, only 10 days after figures showed slowing output at its most important oil field.

The refinery, to be built in western Turkey, will be operational by 2016 and produce 10m tonnes of oil a year. The $4b loan will cover around two-thirds of the construction costs.

SOCAR will fund the rest of the project itself.

Azerbaijan’s wealth is anchored to its energy industry and the refinery plan projects both a confidence about the future and an understanding of its most important market — Europe.

The importance of Europe as Azerbaijan’s main market was underlined when the European Commission approved plans to build a pipeline to pump gas from Azerbaijan across the Adriatic to Italy, on May 17.

A few days earlier, though, on May 7, BP announced that production at the main oil field in the Azeri sector of the Caspian Sea, Azeri-Chirag-Guneshli (ACG), was still falling. Bloomberg reported that production at ACG, which produces three-quarters of the country’s oil, had dropped to 662,000 barrels per day in Q1, a fall of 8.4% from a year earlier.

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(News report from Issue No. 135, published on May 20 2013)

Kazakhstan might not buy Kashagan stake

APRIL 29 2013 (The Conway Bulletin) — Kazakhstan will not buy ConocoPhillips’ 8.4% stake in the Caspian Sea Kashagan oil project, local media quoted Kazmunaigas’ chairman, Lyazzat Kiinov, as saying. Although ConocoPhillips had agreed a deal with India’s national energy company, ONGC, to buy the stake for $5b, Kazakhstan has the right to buy the stake first.

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(News report from Issue No. 134, published on May 6 2013)

Kazakhstan’s Kazmunaigas to invest $10b in next 10 years

MAY 3 2013 (The Conway Bulletin) — Kazmunaigas, the Kazakh state energy company, plans to invest $10b over the next 10 years in exploration to double its oil and gas reverses, chairman Lyazzat Kiinov said. The ambitious plans show how important the energy sector is to Kazakhstan’s economic development.

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(News report from Issue No. 134, published on May 6 2013)

Kazakhstan’s Kazmunaigas sells $3b in bonds

MAY 3 2013 (The Conway Bulletin) — Kazmunaigas, Kazakhstan’s national energy company, sold Eurobonds worth $3b in April, media reported quoting its press service. The relatively low interest on the debt — $2b 30-year Eurobonds sold with an interest of 5.8% and $1b 10-year Eurobonds with 4.45% — shows the attractiveness of lending to Kazmunaigas.

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(News report from Issue No. 134, published on May 6 2013)

China could beat India for Kashagan

APRIL 16 2013 (The Conway Bulletin) — China has shown interest in buying shares in the Kashagan oil project in the Caspian Sea, Kazakhstan’s oil and gas minister, Sauat Mynbayev, told reporters, comments that will cause concern in Delhi.

Potentially favouring China over India for a 8.4% stake in Kashagan (that the US oil company ConocoPhillips is selling) would cement Kazakhstan’s relations with its powerful neighbour and confirm Chinese dominance over the Kazakh energy sector.

China owns roughly a third of Kazakhstan’s energy reserves and is building a series of pipelines to ensure Kazakh oil and gas continues to flow east.

For India, losing out on a slice of the Kashagan project, the biggest oil field discovery in 40 years, would be a blow to its stated strategy of expanding its energy reserves abroad. India has been relatively slow to invest in the Caspian region’s energy projects and is trying to play catch-up.

ONGC, the state-owned Indian energy company, thought that it had secured a $5b deal to buy the stake from ConocoPhillips last year.

Kazakhstan, though, has the final say on who owns stakes in Kashagan and its intervention in a deal that India thought, and hoped, was done could be ONGC’s undoing.

Kazakhstan has until the end of May to decide who to award the stake to, or keep it for itself. Mr Mynbayev said simply that the best offer would win.

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(News report from Issue No. 132, published on April 22 2013)

Kazakhstan lifts moratorium on subsoil licences

APRIL 18 2013 (The Conway Bulletin) — The Kazakh government announced that it had lifted a moratorium on granting more licences to subsoil developers, underscoring the sector’s importance for Kazakhstan’s future development.

Minerals and energy have been the backbone of Kazakhstan’s economic boom since independence from the Soviet Union in 1991 and that is not likely to change.

Global demand for metals may have dropped but lifting the ban, which was introduced in 2008 to allow a smooth introduction of new tax codes, will still spur foreign investor interest in Kazakhstan. The country simply holds too much untapped mineral wealth to be ignored.

And the Kazakh minister for new technologies and industry, Asset Issekeshev, immediately invited foreign companies to apply for licences at a tender in May.

Most of the $170b foreign investment in Kazakhstan since 1991 has been in the energy sector although senior government officials told Reuters the emphasis now would be on metals and non-hydrocarbon minerals.

To further encourage this, the government suggested that miners may be exempt from VAT.

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(News report from Issue No. 132, published on April 22 2013)

China invests in Kazakhstan

APRIL 6 2013 (The Conway Bulletin) — Kazakh president Nursultan Nazarbayev made one of his regular visits to Beijing to meet his Chinese counterpart Xi Jinping. During the visit, Mr Nazarbayev agreed a number of bilateral deals including an extension, media reported, to a pipeline pumping oil from Kazakhstan to China.

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(News report from Issue No. 131, published on April 12 2013)

Chinese visit to Kazakhstan

APRIL 5 2013 (The Conway Bulletin) — Kazakh president Nursultan Nazarbayev is likely to sign various bilateral deals with his Chinese counterpart Xi Jinping when he visits Beijing from April 6 – 8, Kazakhstan’s media reported. The Tengrinews website reported that Kazakhstan has increased crude oil shipments to China by 20% per year since 2006.

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(News report from Issue No. 130, published on April 5 2013)

India buys into Azerbaijani energy projects

MARCH 30 2013 (The Conway Bulletin) — As if waking from a deep slumber and noticing nearby riches to grab, India is slowly buying up energy resources in the Caspian Sea region.

On March 29, Sudhir Vasudeva, head of India’s state-owned energy company ONGC, said that its subsidiary ONGC Videsh had completed the purchase of a 2.72% stake in Azerbaijan’s Azeri-Chirag-Guneshli oil fields in the Caspian Sea and a 2.36% stake in the Baku-Tbilisi-Ceyhan pipeline.

ONGC Videsh bought the stakes from the US oil company Hess for $1b. The deal was announced last year. This deal is important as it marks India’s entry into the Caspian Sea energy race.

India needs more energy and has announced an ambitious expansion plan to match; Central Asia and South Caucasus region is an obvious place to expand in to.

But India is playing catch-up. Chinese, Russian and Western energy companies are already entrenched in the region.

That said, India has unveiled impressive plans. It is pushing to build a pipeline from gas fields in Turkmenistan across Afghanistan to south Asia and it has agreed a $5b deal to buy an 8.4% stake in Kashagan, in the Kazakh sector of the Caspian Sea, from US’s Conoco Phillip.

Kazakhstan has yet to approve the Kashagan deal but India’s Caspian Sea intentions are clear.

(News report from Issue No. 130, published on April 5 2013)

Oil export tax increased in Kazakhstan

APRIL 3 2013 (The Conway Bulletin) — Underlining Kazakhstan’s reliance on its energy sector, Kazakh PM Serik Akhmetov, signed into law a 50% increase in oil export duties.

From April 13, exporters will pay a $60 tax to the government for every tonne of oil they export, up from $40. Reuters quoted deputy economy minister Marat Kusainov as saying that the extra revenue will be spent on social projects.

Wherever the extra revenue is spent, energy companies will no doubt be tired of being used as a cash cow whenever the Kazakh government wants to raise cash.

The government has flip-flopped on the oil export duty, introducing it in 2008, scrapping it altogether in 2009, when the global economy tumbled and energy prices fell, before reintroducing it again.

In 2010, the export tax stood was $20 per tonne. This increased to $40 per tonne in 2011.
The oil export duty also re-enforces the feeling that the Kazakh government is often too focused on taxing energy exporters rather than developing other parts of the economy.

After all, in 2011 Kazakh government ministers promised there would be no oil export tax rise until at least 2014.

Clearly the plan, if not the mind-set, changed.

(News report from Issue No. 130, published on April 5 2013)