Tag Archives: gas

Azerbaijan’s SOCAR exports gas to Turkey

JUNE 28 2016 (The Conway Bulletin) – SOCAR Gas, a Turkey-based subsidiary of Azerbaijan’s state-owned energy company, said it sold around 330m cubic metres of gas in Q1 2016 to the Turkish domestic market. The Turkish government decided to buy up to 1.2b cubic metres of SOCAR’s gas this year. Previously, SOCAR gas exports to Turkey were mostly destined to the Petkim petrochemical plant, in which it owns a majority stake.

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(News report from Issue No. 287, published on July 1 2016)

Lukoil to invest $1b in its Uzbekistan projects

JUNE 27 2016 (The Conway Bulletin) – Russian oil and gas company Lukoil said it will invest around $1b in its Uzbekistan projects and is looking to find South Korean banks that want to back its plans. Lukoil wants to build a gas processing plant in the country and treble its output at the Gissar gas field to 4.8b cubic metres/year by 2017. Lukoil is looking to strengthen its position in Uzbekistan, one of its core markets, ahead of a possible Eurobond issue.

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(News report from Issue No. 287, published on July 1 2016)

inApril makes deal with Kazakhstan-based Geo Energy

JUNE 30 2016 (The Conway Bulletin) – inApril, a Norwegian oil and gas service company, said it had reached a deal with Kazakhstan-based Geo Energy Group to supply it with a seismic acquisition system. The deal, worth up to $30m, according to inApril, will improve the technological footprint of Geo Energy Group, which provides seismic assessments of oil and gas basins in offshore sections of the Caspian Sea.

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(News report from Issue No. 287, published on July 1 2016)

Business comment: Big Projects

JUNE 29 2016 (The Conway Bulletin) – Azerbaijan may resume its dream of building a mega petrochemical processing complex in an effort to revive its oil and gas sector. This alone is good news for the economy of Azerbaijan, which is poised to see its GDP shrink this year for the first time in two decades.

The intent of SOCAR, the state-owned energy company, is to salvage the project, which it had effectively abandoned in February, after its initial investors had either pulled out or stalled financing.

This is the effect of sustained low oil prices. Besides shying away from upstream exploration and production for costly fields, oil and gas companies have also been forced to rethink their plans for downstream processing facilities.

The project initially included an oil refinery, for a total cost of $16.5b. After scrapping parts of the complex, including the refinery, and downsizing the gas processing facility, the project’s price tag fell to around $4b, a cost that Chinese and Russo- Italian ventures, the new potential investors, now deem feasible.

This is a common problem. Big projects have had to face both the doubts of investors in a low oil price era and the protests of locals, who would rather see resources allocated to combating the enduring crisis.

In January, South Korea’s LG pulled out of a project to build a $4.2b petrochemical plant in Kazakhstan, Russia fled an investment to build a $2b hydropower project in Kyrgyzstan, and Azerbaijan seemed to have abandoned hopes for its project.

As oil prices timidly pick up again, Azerbaijan’s announcement that the project might still see the light could potentially lure investors, who had kept themselves at arm’s length from the rather toxic market it had become in the past two years.

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(News report from Issue No. 287, published on July 1 2016)

Azerbaijan downgrades plans for processing plant

JUNE 29 2016 (The Conway Bulletin) – In an effort to revive its aspirations to build a mega petrochemical plant, SOCAR, Azerbaijan’s state-owned energy company, said it would cut the capacity of its gas processing section, lowering the cost by a third to $4b.

SOCAR now plans to build a plant with a processing capacity of 10b cubic metres/year, down from 12b cubic metres/year. Downsizing the project would save around $2b, according to the company.

The original plan was much more grandiose. The OGPC petrochemical complex at Sangachal, 55km south of Baku, had at one point included an oil refinery and was quoted for a total of $16.5b. Azerbaijan wanted the project to become the region’s hub for refined products.

Last year, first Japan’s Mitsui, then the Britain-based unit of US’ Fluor Group came forward to participate in the project, but later dropped out.

SOCAR then scrapped plans for the refinery, bringing down costs to around $6b. In February, company representatives said that construction work had been frozen, due to the sustained economic malaise, triggered by low oil prices.

Now, Suleyman Gasimov, SOCAR’s VP for financing, said the company is considering two offers, one from China’s CNPC and one from a Russo-Italian consortium of Gazprombank, Russia’s export credit agency EXIAR and Italy’s credit agency SACE.

“Currently, we think the proposals from CNPC and Russian-Italian partners are the most suitable for us,” Mr Gasimov said.

If Azerbaijan manages to resurrect OGPC, even in a downsized fashion, the project will give a much-needed boost to the country’s economy.

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(News report from Issue No. 287, published on July 1 2016)

Skyland starts production in Tajikistan

JUNE 19 2016 (The Conway Bulletin) – Australia’s Skyland Petroleum said it started operations at its first well at the Kyzyl-Tumshuk oil and gas field in southern Tajikistan. Skyland has actively operated across Central Asia and the South Caucasus. Skyland said the Kyzyl Tumshuk project was started below budget and will be profitable despite low oil prices.

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(News report from Issue No. 286, published on June 24 2016)

Gazprom agrees Georgia deal

JUNE 17 2016 (The Conway Bulletin) – Russia’s state-owned energy company Gazprom said it agreed a gas supply deal with a private Georgian distributor, Gasko+, stirring criticism in Georgia’s Parliament. Under the deal, agreed on the sidelines of the St Petersburg International Economic Forum, Gazprom will sell 100m cubic metres/year to Gasko+. Georgian MPs have said that the deal risks circumventing the current intergovernmental agreement that allows Georgia to import 10% of the gas Russia sends to Armenia through its territory.

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(News report from Issue No. 286, published on June 24 2016)

Kazakhstan’s Kazmunaigas wants to gain more control of KMG EP

ALMATY, JUNE 17 2016 (The Conway Bulletin) — Kazmunaigas, Kazakhstan’s state-owned energy company, said it wants to change the shareholder’s agreement at its London-listed subsidiary KMG EP, a move that independent directors said would weaken the company.

Kazmunaigas, which owns 57.9% of KMG EP, released a note that called for an extraordinary general meeting in August, that would change the terms in the so-called relationship agreement, a document that was prepared in 2006, when KMG EP listed its global depository receipts in London.

Analysts have said that Kazmunaigas, which has been hit by low oil prices, may be looking to gain more control of KMG EP, which has performed better than its state-owned parent. By securing more shares and improved terms, Kazmunaigas would also strengthen its position ahead of a prospective IPO in the next few years.

But independent directors at KMG EP immediately lined up to voice their concerns about Kazmunaigas’ plans. They also said that they would resign if they were passed.

“[We] strongly recommend that all Independent Shareholders vote against the Resolutions proposed by NC KMG,” three of the four independent directors on the board of KMG EP said in a joint statement.

The directors also said the new document will “significantly weaken” independent voices in the company’s decision-making processes and the Kazmunaigas offer of $7.88/GDR to minority shareholders “significantly undervalues” KMG EP.

Kazmunaigas said a new deal would improve efficiencies at KMG EP.

And the row looks to be getting more bitter. Kazmunaigas chairman Sauat Mynbayev also said the KMG EP share price could fall by one-third to around $5/GDR if investors didn’t go along with the plan.

“I don’t think the stock price will jump, in fact, if the shareholders decide to go against our plan, it could fall to, say $5/share,” he said.

In effect, the government sent a strong signal to shareholders that it wants to increase control over KMG EP.

If shareholders choose to go against the plan, a bitter battle for control looms.

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(News report from Issue No. 286, published on June 24 2016)

Stock market: KMG EP

JUNE 23 2016 (The Conway Bulletin) – The price of KMG EP’s global depository receipts (GDRs) in London has not moved much in the past week, despite the dispute between its owner, Kazakhstan’s Kazmunaigas, and its independent directors.

KMG EP is the upstream branch of the Kazakh state-owned oil and gas company. It listed its GDRs in London after an IPO in 2006. The closing price on Thursday was $7.24/GDR, which follows a trend that since mid- May has pushed KMG EP’s GDRs above the $7 benchmark.

Despite low oil prices and decreasing export volumes, KMG EP has managed to perform well in the first quarter of the year, due to the sharp depreciation of the tenge against the US dollar. A weaker tenge helped KMG EP offset domestic costs and increase the value of its exports, denominated in US dollars, despite the plunge in global prices.

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(News report from Issue No. 286, published on June 24 2016)

Stock market: Tethys, Nostrum

JUNE 17 2016 (The Conway Bulletin) – Central Asia and South Caucasus-linked stocks fell this week, driven down by lower oil prices. As shown in the table, Tethys and Nostrum shares dropped significantly over the past week after a rather stable month.

Roxi, on the other hand, moved against the tide, gaining 15.3% in one week.

On June 14, the company’s non-executive director Edmund Limerick purchased 500,000 shares at 9.8p/share, for a total of £49,000. Mr Limerick and his wife now own 1.15m shares, or 0.12% of the company, up from 0.07% before the purchase.

The deal pushed up the share price, giving it a boost after weeks of downward pressure.

Kuat Oraziman, CEO, and Kairat Satylganov,CFO and director, own Roxi, which operates in Western Kazakhstan, not far from the massive Tengiz oilfield.

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(News report from Issue No. 285, published on June 17 2016)