APRIL 5 2016 (The Conway Bulletin) – A court in the UAE extradited to Kazakhstan Mirkhat Alimbetov, former head of Kakadu, a construction company accused of embezzling around $3m from government tenders. Mr Alimbetov is now being held in a prison in Astana before his trial. He has been on the run since 2009.
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(News report from Issue No. 275, published on April 8 2016)
ALMATY, APRIL 4 2016 (The Conway Bulletin) — The Kazakh government has filed a $1.6b fine against the consortium that operates the Karachaganak gas condensate field in northern Kazakhstan, Russian energy company Lukoil said, sparking fears about corporate governance and contract sanctity.
If the fine was enforced it would be, by far, the largest-ever penalty imposed on an energy consortium in Kazakhstan
Lukoil said that the lawsuit concerned changes to the profit scheme of Karachaganak’s production sharing agreement contract.
“Lukoil is involved, along with other Karachaganak consortium members, in a dispute with the Republic of Kazakhstan regarding the calculation of both cost recovery and an equity index in accordance with the Karachaganak production sharing agreement. The share of the total fine Lukoil will have to pay is $214m (15.6b roubles),” the company said in a statement.
Essentially, the fine focuses on when exactly the partners at Karachaganak have earned back their initial investments and how the equity stakes are divided. Once Karachaganak has paid back the initial start-up investment it shifts onto a higher tax regime. The Kazakh government wants this to happen soon, especially as it is trying to battle its way through a sharp economic downturn.
None of the other consortium members have commented. They are Eni (29.25% stake), Shell (29.25% through BG), Chevron (18%), Lukoil (13.5%) and state-owned Kazmunaigas (10%).
Analysts say the fine was consist- ent with the government’s practice of pressuring business ventures.
“Kazakhstan’s government has repeatedly tried to exert pressure on and expand its presence in Karachaganak, which is a profitable project. This fine is in line with the government’s strategy of increasing state shares in profitable projects,” said Nygmet Ibadildin, professor of energy policy at KIMEP University.
In 2012, Kazmunaigas bought its 10% stake in Karachaganak for an undisclosed amount. Shortly after this deal, Kazakhstan dropped a two year long $1.2b tax-back claim against the consortium. Many analysts linked the two issues.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 1 2016 (The Conway Bulletin) – In March, consumer prices continued to increase in Kazakhstan, according to the National Statistics Committee. Inflation stood at 0.5% in March alone and the annualised level now stands at 15.7%, its highest since 2009. Analysts have said that inflation in Kazakhstan will continue to climb.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 6 2016 (The Conway Bulletin) – The Eurasian Economic Union moved a meeting of its PMs scheduled for April 8 in Yerevan to Moscow because of fighting between Armenia-backed fighters and Azerbaijani forces over the disputed region of Nagorno-Karabakh. Before the meeting was moved, Kazakh PM Karim Massimov had cancelled his trip to Armenia’s capital. The Moscow meeting will now be held on April 13.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 5 2016 (The Conway Bulletin) – The Caspian Pipeline Consortium (CPC) which operates a pipeline that pumps oil around the northern shore of the Caspian Sea said it will ship oil from Kashagan in the fourth quarter of the year. The CPC statement gives extra impetus to the Kazakh government assessment that the Kashagan project will be operational by the end of 2016. Kashagan, which was supposed to propel Kazakhstan into the Premier League of oil producers was closed in 2013 for repairs.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 1 2016 (The Conway Bulletin) – KazTransOil, Kazakhstan’s state owned pipeline distributor, said its revenue grew 3.2% to 213b tenge ($617m) in 2015. In US dollar terms, however, the company’s revenues shrank by around 30% due to the sharp depreciation of the tenge last summer. Analysts forecast a decline in sales for KazTransOil in 2016, but the company hopes to boost its revenues in 2017 with the giant Kashagan project coming online.
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(News report from Issue No. 275, published on April 8 2016)
ALMATY, APRIL 4 2016 (The Conway Bulletin) — Russian miner Polymetal continued its shopping spree in Kazakhstan buying gold miner Orion Metals, a company owned by Glencore’s subsidiary Kazzinc, for an initial $100m.
Orion Metals owns the Komarovskoye Gold Deposit, which lies 150km south of Polymetal’s Varvarinskoye field in north-east Kazakhstan.
“Komarovskoye has long been in our sights as a natural close fit for our Varvara hub,” Vitaly Nesis, CEO of Polymetal, said in a statement.
“We are very excited about the transaction which is expected to strengthen production profile, lower costs, and provide substantial incremental cash flows at Varvara in the near term.”
Varvara is a reference to Polymetal’s Varvarinskoye field.
Polymetal said Komoarovskoye, the gold field that Orion Metals owns, holds 43.5 tonnes of gold.
The deal with Kazzinc could reach $180m through the payment of royalties, if gold prices rise significantly.
In the past six months, Polymetal acquired companies and fields connected or close to its operations in both Kazakhstan and Armenia, in an effort to build production hubs.
Last November, Polymetal upgraded the size of its gold reserves at the Kyzyl project by 8% to 29.2m tonnes.
In 2015, it had bought the Kyzyl project for $620m from Sumeru, a private group owned by Timur Kulibayev, son-in-law of Kazakh President Nursultan Nazarbayev.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 3 2016 (The Conway Bulletin) – A massive leak of documents from the Mossack Fonseca law firm based in Panama showed that government leaders and businessmen around the world have been using offshore tax havens to shelter assets and cash. Included in this list were Azerbaijani President Ilham Aliyev’s family, Georgia’s former PM Bidzina Ivanishvili and the grandson of Kazakh President Nursultan Nazarbayev.
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(News report from Issue No. 275, published on April 8 2016)
APRIL 8 2016 (The Conway Bulletin) – Central Banks in Central Asia are boasting about de-dollarisation these days, painting a rosy picture of their success in combating their economies’ dependence on the greenback.
A closer look at the stats, however, reveals that a combination of heavy interventions in the currency markets and interest rate tweaking were the main drivers of healthier Kazakh tenge and Kyrgyz som.
But now Central Banks have to grapple with inflation, which continues to grow, and demand for credit, which continues to shrink.
Central Banks propped up local currencies, against a US dollar that has now slowed its rise against Emerging Markets currencies and commodities.
Restrictions on exchange points, bans on pricing goods in dollars and public calls for confidence have all contributed to curbing the use of dollars.
But Central Banks might have run out of options now and they need to steer away from “crisis mode” if they want to really restore confidence in their still ailing currencies.
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(Editorial from Issue No. 275, published on April 8 2016)
APRIL 4 2016 (The Conway Bulletin) – Kazakhstan’s state-owned oil company, Kazmunaigas, said it finalised an agreement it signed in December with Switzerland-based oil trader Vitol. The deal will allow Vitol to buy oil from Kazmunaigas for an advance payment of up to $3b. The press service of Samruk Kazyna, the sovereign wealth fund that owns Kazmunaigas, said the deal will last for four years.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 275, published on April 8 2016)
