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Oil Chronicles
January
The Ministry of Energy has developed a draft order to ban the import of gasoline to Kazakhstan from Russia for three months. This refers to the supply of petroleum products by rail. The draft document was published on the Ministry's website. The draft document must be approved and registered with the relevant agencies. Earlier, a similar ban on the import of gasoline from Russia was introduced on August 25, 2018. As explained by the Vice-Minister of Energy, Bolat Akchulakov, Kazakhstan under the agreement with Russia within the EEU has the right to periodically introduce a conventional ban on the import of petroleum products.
KazTransOil JSC (KTO) and Karachaganak Petroleum Operating B.V. (KPO) signed a new contract for the provision of services for the operation and maintenance of the Karachaganak-Atyrau pipeline in the amount of 6.68 bln KZT, the Public Relations Department of the national operator reports. The budget of the contract for three years with a possible extension for two periods of 12 months is calculated using the inflation rate for 2019-2021 and taking into account the annual increase in the payroll of staff, and the prices for vehicles provided, the report says. KTO provides KPO the operation and maintenance services of the Karachaganak-Atyrau pipeline for 16 years. The budget of the previous five-year contract (2013-2018) amounted to 6.679 bln KZT. The pipeline with a total length of 635.5 km was put into operation in 2003 to pump raw materials from the Karachaganak field into the oil pipeline of the Caspian Pipeline Consortium through the terminal in Atyrau for subsequent export. The design capacity of the pipeline is 10 mln tons/year.
Azerbaijan state company SOCAR and KazMunayGas signed a Memorandum of Understanding. The signing took place in Baku during the visit of the Kazakhstani delegation headed by the Chairman of the Board of KMG Alik Aidarbayev. The delegation also included the Deputy Chairman of the Board for Exploration, Production and Oilfield Services of KazMunayGas Kurmangazy Iskaziyev, General Director of KazTransOil JSC Dimash Dosanov, Director General of National Maritime Shipping Company Kazmortransflot Marat Ormanov.
During the meeting, prospects for cooperation in all segments of the oil and gas industry were discussed, as well as a plan for joint activities in the near future. After that, the heads of SOCAR and KMG signed a Memorandum of Understanding. The document provides for cooperation between companies, including in the field of exploration in the Caspian sea, joint research of geological and geophysical materials for the exploration of hydrocarbons, as well as in the field of logistics, trading of oil and petroleum products. As the first concrete cooperation project, the Memorandum provides for the transportation to Baku and modernization of the Satti floating drilling rig, owned by KMG, for subsequent use in drilling operations on SOCAR projects in the Azerbaijani sector of the Caspian sea.
During the meeting, a Protocol of Intent was also signed between the marketing Department of SOCAR and Kazmortransflot on the prospects of cooperation in the field of transportation of hydrocarbons.
Daniyar Berlibayev was elected Chairman of the Board of Directors of KazTransOil JSC, the website of the Kazakhstan stock exchange (KASE) reports. Taking into account the latest changes that occurred on December 28, 2018, the Board of Directors was elected in the following composition: D. Berlibayev – Chairman of the Board of Directors; Dimash Dosanov and Nurtas Shmanov – Members of the Board of Directors; Almasbek Muhashev, Hadrien Fraissinet, and Vinicius Agostini – Independent Directors.
D. Berlibayev, Advisor to the Chairman of the Board of KazMunayGas from 2016 to 2017, was the Executive Vice President for Transportation, Refining and Marketing of KMG, earlier – from 2012 to 2016 – Deputy Chairman of the Board and First Deputy Chairman of the Board of KMG.
The Korkyt Ata compressor station is commissioned on the Beineu-Bozoi-Shymkent (BBS) gas pipeline. With the commissioning of this vital gas transportation system facility, the implementation of the most significant investment project to increase the throughput capacity of Beineu-Bozoi-Shymkent from 10 bln cubic meters per year to 15 bln cubic meters. At the same time, five bln cubic meters of gas will fully cover the needs of the southern regions of the country, and ten bln cubic meters will be exported to China. The station is located near the village of Aksuat of Kyzylorda region. Now, as part of the investment project along the BBS gas pipeline three compressor stations are operating on the territories of Turkestan and Kyzylorda regions: Aral, Korkyt Ata, and Turkestan.
February
By the decision of the Board of Directors of National Geological Exploration Company Kazgeology JSC, Almaz Abdygalimov appointed as Chairman of the Board, primeminister.kz reports. Abdygalimov was born in 1974 in Almaty region. He graduated from Kazakh National Technical University named after K. Satpayev, with a degree in Geology of oil and gas, Kazakh Economic University named after Ryskulov, with a degree in Finance and credit. At various times he worked at the Institute of Geological Sciences named after Satpayev, oil and geological companies, in 2017-2018 he held the position of Deputy General Director of KMG-Eurasia LLP. Since December 2018, he has been acting Chairman of the Board of Kazgeology JSC.
Starting from February 4, the national company KazMunayGas ceased to own a share in KazMunaiGaz A.G., Kazakhstan stock exchange (KASE) reports.
"The percentage ratio of the number of shares (stakes, equities) of the organization to the total number of outstanding shares (stakes, equities) of the organization on the date following the date of change in the list of organizations in which the Issuer has ten or more percent of shares (stakes, equities): 0", – said in a statement of KASE.
Crude oil supply contracts were signed between KMG and KazMunaiGaz A.G. The catalog of Bloomberg states that KazMunaiGaz A.G. was founded in 2004, the company's activity is wholesale of crude oil and petroleum products.
February 5, for the first time, Kazakhstan held trading on the sale of liquefied petroleum gas on the electronic platform of the ETS commodity exchange. According to the data provided by the exchange, the deals were held on February 5 and 6 for liquefied petroleum gas propane-butane technical mixture EXW. On February 5, the auction was held for the amount of 70 tons, the price was 43,345 KZT per ton, the total amount of the transaction exceeded 3 mln KZT. On February 6, the volume also amounted to 70 tons at a price of 44 thous. KZT, the total amount also exceeded 3 million KZT.
For the time being, it only involves domestic trading, without access to export markets, but this option is also considered in the future if there are applications. In June 2018, the Parliament adopted the Law "On gas and gas supply," which defined the mechanisms for selling liquefied gas through the exchange. According to it, the mechanism of mandatory gas supply by producers to the domestic market through electronic trading platforms (ETP), which are not covered by the approved price limit of the Ministry of Energy, was approved. At the current stage, it is expected to sell 20% of liquefied gas through the ETP.
The maximum wholesale price of liquefied gas is determined by the Ministry in the amount of 38 437 KZT per ton, excluding VAT. Currently, about 72% of the gas produced by Kazakhstan is supplied to the domestic market.
Richard Howe has been appointed Managing Director of North Caspian Operating Company N.V. (NCOC), which is developing the Kashagan offshore field. He has extensive international experience in senior positions in various divisions of Shell. For the last 18 months, he has served as Director of Operations in NCOC. His appointment was supported by a unanimous decision of the NCOC Board of Shareholders.
February 6, the Board of Directors of the National Company KazMunayGas decided to change the organizational structure and distinction of management processes in key business areas: geology and exploration; production; refining and marketing of oil; oil transportation; international projects and the construction of the Saryarka pipeline.
In this regard, starting from February 7, 2019, professionals in the relevant fields have been appointed as curators of the development of key business areas, among them: Kurmangazy Iskaziyev appointed Deputy Chairman of the Board for Exploration, Production and Oilfield Services He will be responsible for expanding the resource base and efficient inventory management of subsidiaries. Daniyar Tiyessov appointed Deputy Chairman of the Board for Refining and Marketing, and will be responsible for the implementation of key performance indicators. Daniyar Berlibayev appointed Deputy Chairman of the Board for oil transportation, international projects, and construction of the Saryarka gas pipeline. In his new position, he will be responsible for the export and transportation of oil, further refining of oil in export markets, maximizing the value for the company, as well as for the implementation of the strategic gasification project in Astana and the Northern regions of the country.
Starting from February 11, Zhakyp Marabayev appointed Deputy Chairman of the Board for Production, he will be responsible for the achievement of planned targets of production of oil and gas, increasing the efficiency of the organization and coordination of production activities.
February 8, a contract for the sale of 100% stake in KMG-Retail LLP was signed with the winner of the bidding – Petro-retail LLP. Starting from April 1, 2019, the lease and operation of the gas station network between KMG-Retail LLP and KazMunayGas Onimderi LLP, a subsidiary of KMG, which operated the gas station network and retail sale of petroleum products, is being terminated. Accordingly, since April 1, 2019, the operation of the gas station is carried out by the new owner – Petro-retail LLP.
According to the report, the privatization of the gas station network corresponds to the KMG development strategy and is carried out within the framework of the program to reduce the share of the quasi-public sector in the economy, following the principles of Yellow Pages.
Vitol, the world's largest oil trader, plans to access liquefied petroleum gas from the Kashagan field in Kazakhstan and can finance the construction of an export-oriented processing facility, industry and company sources told Reuters.
Liquefied petroleum gas is mainly a by-product of oil development at the field, and currently there is no infrastructure for processing, storage and transportation of liquefied petroleum gas from Kashagan. The new facility, which is expected to be operational in about two years, will desulfurize the liquid propane-butane mixture delivered by pipeline from the Bolashak plant in Kashagan, divide it into propane (about 70-75%) and butane (about 25-30%) and load it into railway tanks.
Vitol, Kazakhstan's largest oil supplier, is ready to invest in this project – worth more than $300 million – already in 2019 to build a plant that annually produces 500,000 tons of propane and butane, according to Reuters sources. The trader appealed to NCOC and the shareholders of Kashagan with a proposal to build a plant for the processing and export of liquefied petroleum gas near the Karabatan railway station in Atyrau region, but there was no immediate reaction. Vitol declined to comment, but Vitol sources confirmed the trader's interest in the project. Sources reported that according to the schedule of the government of Kazakhstan, the plant should be put into operation in 2021.
Vitol plans to supply propane and butane to the world market through the Russian Black Sea terminal in Taman, where Vitol has a contract for transshipment. "Vitol wants to buy low-quality LPG, purify it and sell it through Taman," – a source familiar with the situation said.
February 16, Astana hosted a meeting of Chairman of the Board of NC KazMunayGas, Alik Aidarbayev, with President of the Azerbaijan state oil and gas company SOCAR, Rovnag Abdullayev. During the meeting, a contract of trust management of a self-elevating floating drilling rig (SEFDR) was signed between the subsidiaries of the parties: KMG Drilling & Services LLP and Caspian Drilling Company Ltd. The main purpose of the agreement is to operate SEFDR on projects implemented by the Azerbaijani side. Thus, one of the projects is the use of SEFDR at the Absheron structure, developed by British Petroleum.
The court of appeal of Amsterdam rejected the appeal of Kazakhstan and Samruk-Kazyna Fund about the arrest cancellation of shares valued 5.2 bln dollars in KMG Kashagan B. V. with regard to the Stati case. Through its stake in KMG Kashagan B. V. Kazakhstan participates in the North Caspian Сonsortium.
The court held that although Samruk-Kazyna was a separate legal entity, the company did not have sufficient economic independence and could not pursue its policies contrary to the general political position of the state. The court also ruled that Samruk-Kazyna functions as a tool to protect Kazakhstan's assets. Since the existing shares of Kashagan are used for commercial purposes, Samruk-Kazyna cannot rely on the protection of state immunity, the decision says.
Shukhrat Danbay, appointed General Director of Atyrau Refinery LLP. He was born in 1963 in Kentau, South Kazakhstan region. He graduated from Kainar University with a degree in International Economic Relations. Ph.D. in Economics, Doctor of Business Administration (DBA). He headed large commercial structures for the supply and refining of oil, wholesale and retail sale of petroleum products. Since September 2009 he headed Pavlodar Petrochemical Plant JSC" (in March of 2013 converted into PPCP LLP). Recently he worked as Managing Director for refining of KMG.