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UK’s Gunsynd invests in Azerbaijan

NOV. 30 2016 (The Conway Bulletin) — British investment company Gunsynd increased its stake in Zenith Energy, a Canada-based oil and gas company focused on Azerbaijan. Gunsynd bought 300,000 shares for £49,000 ($62,000) and now holds a 1.6% stake in the company. Zenith’s subsidiary, Zenith Aran Oil, signed a production sharing agreement with state-owned SOCAR in March for the exploitation of several small- scale oil fields.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Kazakh court sentences gunman to life

NOV. 28 2016 (The Conway Bulletin) — A court in Aktobe, west Kazakhstan, sentenced seven men who shot dead eight people in a series of attacks earlier this year to life jail sentences. Eighteen more people who helped the group were given between two and five year prison sentences. The judge described the men, who attacked a police outpost, as Islamic extremists.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Tax authorities in Kazakhstan investigate Karachaganak

NOV. 24 2016 (The Conway Bulletin) — Kazakh President Nursultan Nazarbayev said the tax authorities are investigating the consortium operating the Karachaganak gas and condensate field in the north of the country for unpaid taxes and that the government will seek a new profit sharing scheme. Anglo-Dutch energy company Shell and Italy’s Eni are the field’s operators and largest shareholders with a 29.25% stake each. US-based Chevron (18%), Russia’s Lukoil (13.5%) and state-owned Kazmunaigas (10%) own the rest.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Fertiliser corruption unfolds in Armenia

DEC. 1 2016 (The Conway Bulletin) — Armenia’s State Commission on the Protection of Economic Competition said the government had wasted millions of dollars after it gave a contract in 2012 to a single company called Berriutyun to supply fertilisers across the country. There had previously been multiple suppliers. The commission said Berriutyun, linked to a former finance minister, had artificially increased prices by 36%.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Opec, Azerbaijan and Kazakhstan

DEC. 2 2016 (The Conway Bulletin) — Oil prices shifted up more than 10% after OPEC, the group of oil exporting countries, agreed to reduce output by 1.2m barrels/day starting in January.

This is good news for oil-rich countries across the South Caucasus and Central Asia, as the potential positive impact on oil prices could be sustained for a few months longer.

Throughout 2016, OPEC has repeatedly pledged to decrease output if non-OPEC countries also participated in the cut. In reality, though, the issue at stake was Saudi Arabia’s unwillingness to relinquish market share to Iran, who had just re-emerged from western sanctions and rapidly increased its output.

Now Saudi Arabia will slash 500,000 barrels/day from its output of around 11m barrels/day. Other OPEC countries will cut a total of 700,000 barrels/day and some non- OPEC countries pledged cuts for 600,000 barrels/day. For reference, the total cut would be 20% larger than Kazakhstan’s total oil production in 2016.

In fact, both Kazakhstan and Azerbaijan have used the OPEC deals as smokescreens to conceal declining production figures, as some of their projects have become unsustainable at low oil prices.

The output from the giant offshore field of Kashagan, which is three years late in hitting commercial levels of production, is no consolation either for Kazakhstan. Analysts have said that the field, sited in the northern part of the Caspian Sea, is profitable only with oil prices at $100/barrel at a minimum, a figure that is currently not on the horizon.

This means that Kazakhstan’s government will have to wait longer to reap the benefits of its largest oil basin.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Chemical plant in Armenia declares bankruptcy

NOV. 30 2016 (The Conway Bulletin) — A court in Armenia declared the Nairit chemical plant bankrupt after it failed to pay back its $2.5m electricity bill to Electricity Networks of Armenia, the national distributor. Nairit halted operations in 2010, as its rubber and latex plant became unprofitable. A recent audit said that a $300m investment would be necessary to resume operations and the World Bank recommended the plant be declared bankrupt. British- registered Rhinoville Properties has owned 90% of the plant since 2006. The Armenian government owns 10%.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Trump and Kazakh President share telephone call

ALMATY, NOV. 30 2016 (The Conway Bulletin) — In a telephone conversation with Kazakh president Nursultan Nazarbayev, US President-elect Donald Trump described Kazakhstan as a “fantastic success” and a “miracle”.

A briefing of the telephone conversation released by Kazakh president Nursultan Nazarbayev’s press service said that the two leaders had also agreed to meet up shortly.

“D.Trump stressed that under the leadership of Nursultan Nazarbayev our country over the years of Independence had achieved fantastic success that can be called a ‘miracle’,” the Akorda press release said.

US media later reported that Mr Nazarbayev was the 44th national leader that Mr Trump had spoken to since winning the US election in November. He is also the only leader in the South Caucasus/Central Asia region that he has spoken to.

Importantly for the region, the Akorda press service quoted Mr Trump as saying that he was confident that US-Russia relations can be improved.

“US President-elect underscored that taking into account the results of a telephone conversation with the Russian President Vladimir Putin, he is very optimistic about the prospects of developing cooperation between Washington and Moscow,” the press release said.

Russia is the main economic driver for the region and poor US- Russia relations have been one of the factors that has stumped low regional economic growth, pushing Kazakhstan towards a recession.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Azerbaijan’s SOCAR walks away from deal to buy Greek gas pipeline network

DEC. 1 2016 (The Conway Bulletin) — Azerbaijan’s state-owned SOCAR and Italy’s Snam pulled out of a deal to buy a major stake in Greek gas distributor DESFA after a row about the price, ending three years of on-off negotiations.

The failure of the deal scuppers SOCAR’s ambitions to own a major gas pipeline network inside the EU that would also have acted as the final section of the so-called Southern Gas Corridor, a network of gas pipelines that it has built to pump gas from the Caspian Sea to Europe.

Greece’s energy ministry announced the collapse of the deal.

“In the last months, the government has been in ongoing talks with representatives of the companies SOCAR and Snam for the sale of 66% of DESFA. The atmosphere in the talks was constructive,” it said in a statement.

“Nevertheless, the offer submitted on the part of the prospective buyers regarding the reduction of the sale price (repayment in instalments) was legally impossible and would have invalidated the tender.”

Neither SOCAR nor Snam have commented.

The deal was originally hailed as a landmark agreement in 2013 when SOCAR agreed to pay €400m for a 66% stake in DESFA.

The EU, though, stepped in to block the deal because it failed to comply with its market competition laws. This bans companies that own upstream elements of an energy supply chain from owning more than 49% of downstream elements.

In July this year Stergios Pitsiorlas, chairman of the state Hellenic Republic Asset Development Fund, said that SOCAR had found a partner in Italy’s Snam. They would, he said, split the stake. SOCAR would buy 49% and Snam 17%.

This air of success, though, has soured over the last few months when SOCAR and Snam tried to renegotiate the price. They said a 50% collapsed in energy prices since 2014 meant that the original €400m price tag was over-inflated.

Now the deal has been declared dead with Greece officials apparently refusing to budge on the price.

Despite the failure of SOCAR to buy DESFA, the Southern Gas Corridor should still be delivering gas to Europe by 2019/2020.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Stock market: Georgian lari and Azerbaijani manat

DEC. 2 2016 (The Conway Bulletin) — Currencies in the South Caucasus have declined sharply over the past few weeks after a slew of poor economic data and a strengthening US dollar.

The Georgian lari hit an all-time low on Tuesday, when it traded at 2.53/$1. A year ago it traded at 1.84/$1. In the past two months, it has fallen by 8%.

The government in Tbilisi said the slide was due to a negative trade balance and the strengthening US dollar. In what could have been a spiral effect, demand for US dollars within Georgia soared, as people feared a sharper depreciation of the national currency.

Macroeconomic statistics have shown that Georgia’s GDP growth has slowed in the past months, disappointing observers.

The Azerbaijani manat, the world’s worst-performing currency in 2015, has also depreciated against the US dollar, down 6.5% in the last 60 days. It traded at 1.73 on Thursday, down almost 40% compared to last year.

Azerbaijan’s banks also stopped selling US dollars due to shortages.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

PepsiCo plans expansion in Kyrgyzstan

NOV. 29 2016 (The Conway Bulletin) — US giant food, snacks and beverage manufacturer PepsiCo will expand its production line to produce 2.5 tonnes of cottage cheese annually at its factory in Bishkek. PepsiCo entered the Kyrgyz market in 2010, after buying a 66% stake in Russian dairy producer Wimm-Bill- Dann for $3.8b. It produces its cottage cheese under the Merry Milkman brand.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)