Karachaganak consortium seeks to recover over $1 billion in paid oil export duty

Karachaganak Petroleum Operating (KPO), a joint venture led by British BG Group and Italian Eni, is seeking to recover more than $1 billion in export taxes paid to Kazakhstan, Energy Minister Sauat Mynbayev told reporters on Tuesday.

The KPO consortium, which also includes Chevron and Russian LUKOil, develops the Karachaganak gas condensate deposits in western Kazakhstan. The disputed amount refers to an oil export duty the KPO consortium paid between May 2008 and January 2009.

Most major foreign companies operating in Kazakhstan under so-called Production Sharing Agreements (PSA) have been exempt from the levy but the government later decided that Karachaganak project was not. The KPO was forced to pay the duty despite its objections but reportedly filed a case in the London-based court of Arbitration of the International Chamber of Commerce.

“We believe the export customs duty does not apply to Karachaganak in accordance with the agreement that we have signed,” Peter Dranfield, head of BG Kazakhstan, told journalists last year.

Kazakhstan introduced the duty, originally set at $109.91 per ton, in May 2008, and stood at $203.8 per ton just before it was abolished in January 2009.

Silk Road Intelligencer.