Projects
Moldovan Investors' Adventures in Kazakhstan
In the first days of January, Tristan Oil Company issued an official statement about winning the arbitration proceedings on the claim to the Government of Kazakhstan in the amount of $506 million. According to Tristan Oil, the cause of the action was Kazakhstan’s capture of investments of Tristan Oil in Kazpolmunai LLP and Tolkynneftegaz LLP, acting as guarantors of issue of the covered bonds of Tristan Oil maturing in 2016. The report states that the Company started having problems with Kazakhstan already at the end of 2008, when about a dozen of different government agencies began some series of cumbrous business checks. These checks, according to the plaintiff, led to false accusations of illegal actions and to the prosecution of the General Manager of Kazpolmunai LLP and criminal charges against three other leaders of Kazpolmunai LLP and Tolkynneftegaz LLP.
As follows from the plaintiff's claim, the actions of the Kazakh side forced the Company to spend hundreds of millions of dollars on unwarranted tax and criminal penalties, and ultimately led to the capture of deposits in 2010. The arbitration award, issued by the Court, formed under the auspices of the Stockholm Chamber of Commerce, states that Kazakhstan violated its international right to recognize the plaintiff’s investments fair and equitable. Also, the arbitration award confirms that Tristan Oil Company and the directors of Kazpolmunai and Tolkynneftegaz suffered from illegal activities in Kazakhstan and orders the Government of Kazakhstan to reimburse the cost of the investment. In addition to the claim of more than $506 million, the payments also include interests on the amount of $497.7 million as of April 30, 2009 in the amount of 6-month U.S. Treasury bills. In accordance with the previously announced agreement on division and conditions of debt bills, any revenues collected as a result of the arbitration award of the Republic of Kazakhstan will be channelled into a special account in New York, and the holders of collateralized debt obligations of Tristan Oil will receive 70% of this amount, until the principal amount and interests on the debt are repaid in full.
How this happened
Petroleum wrote about the conflict of a Moldovan oligarch Anatol Stati with the Government of Kazakhstan (see “Gas attack”, Petroleum No. 5, 2010). A brief chronology of events is as follows. Offshore Tristan Oil Company Ltd., registered in the British Virgin Islands, through the agency of the companies Kazpolmunai and Tolkynneftegaz were engaged in the exploration and development of oil and gas fields and hydrocarbons production in the Caspian basin and Kazakhstan in the Borankol and Tolkyn fields. According to the reporting of Tristan Oil, in 2009 the Company sold the products in the amount of $174,759 million, being $ 71,389 million the gross profit of the Company. Kazpolmunai transferred the rights to the Kazakh fields till May 23, 2022, and Tolkynneftegaz till December 4, 2018. All the three companies - Tristan Oil, Kazpolmunai LLP and Tolkynneftegaz LLP - are 100% owned (directly or indirectly) by Ascom Group, controlled by the Moldovan billionaire businessman Anatol Stati. Besides Kazakhstan, Ascom deals with oil production in other countries as well.
Anatol Stati started facing problems in Kazakhstan by the end of December 2008, when the Ministry of Energy and Mineral Resources of Kazakhstan (MEMR) stated that when the authorization on the transfer of shares Tolkynneftegaz from one offshore owner to another was issued by the competent authority, the buyer presented inaccurate data and mislead the MEMR. The actual transfer took place in 2005, and the application for legal implementation was submitted only in 2007. And that, according to the fiscal authorities, affected the sum of the Company taxation. However, the amount of tax claims that time was not too great for the oil Company - about $300 million thousand at the current exchange rate. Nevertheless, on the night of 5 to 6 May 2009 the staff of the Financial Police raided the offices of the two companies, arrested their accounts and property, and Sergei Kornegrutsa, CEO of Kazpolmunai and Stati’s proxy, was detained and placed in a detention centre.
A little bit later, the Financial Police reported that the Company, led by Kornegrutsa, “operated oil and gas pipelines without a license, having illegally received KZT 21.67 billion of income”. According to investigators of the Financial Police, for nearly 12 years Kazpolmunai had illegally transported the extracted oil through the pipeline network owned by the National Company KazTransOil. In October 2009, Aktau City Court found Sergei Kornegrutsu guilty under the Article "illegal entrepreneurship" and sentenced him to four years' imprisonment with confiscation of property. The General Director of Tolkynneftegaz managed to escape, he was declared wanted and charged in absentia of deriving illegal income in the amount of KZT 125 billion. In August of the same year, the Ministry of Oil and Gas of Kazakhstan terminated the contracts of Tolkynneftegaz and Kazpolmunai for subsoil based on the court decision which found both companies to be unscrupulous investors. The Government of Kazakhstan also cancelled the contract with Tolkynneftegaz Company for the construction of Borankol gas processing plant. Selected deposits were transferred to the management of the National Company KazMunaiGas.