Kazakhstan's commercial bust-ups with Western majors such as Eni, BG and Chevron have grabbed the headlines in recent years, reflecting the rise of "resource nationalism" in the republic. But for sheer drama, these disputes cannot match the saga involving a Moldovan oil company, Ascom, which is preparing to challenge the Kazakh government in the international arbitration courts for "expropriating" its oil production assets and transferring them to state oil company Kazmunaigas (KMG).
Owned by Moldova's richest tycoon, Anatoli Stati, Ascom has been active in the Caspian for more than 15 years, firstly as a drilling contractor in Turkmenistan and then as an oil producer in Kazakhstan. In 1999, Ascom bought two prospective Kazakh producers, Kazpolmunai (KPM) and Tolyknneftegas (TNG) and invested heavily in drilling new wells and building infrastructure at the Borankol and Tolkyn fields. In 2006, the company raised more than $300 million when it sold bonds in a special-purpose company called Tristan Oil that were guaranteed against the assets held by KPM and TNG. A second smaller bond issue was held the following year and a third in 2009, raising the total amount to $531 million. The paper carries 10.5% interest and is due for repayment in 2012.
Ascom's fortunes peaked in 2008, when its production in Kazakhstan reached 56,000 barrels per day of oil equivalent -- more than double the previous year's output. The company also announced a major discovery at an adjacent block and at the same time received several bids for its Kazakh assets, including an offer from KMG. It was then that Ascom's troubles started, as the Kazakh government launched a series of attacks on the company that Ascom claims was a "systematic campaign of harassment and illegal treatment."
Ascom pins at least some of the blame on a purported letter sent by former Moldovan President Vladimir Voronin to Kazakh President Nursultan Nazarbayev in which he made "false and defamatory" accusations against Stati, who is considered to be Voronin's rival. Ascom's vice president, Artur Lungu, tells Nefte Compass that Stati asked Moldova's prosecutor-general to open a criminal investigation into the affair and says an inquest is now under way. Lungu claims the arrest of Stati's son Gabriel last year in Chisinau was related to the dispute. Voronin, who stepped down as Moldovan leader in 2009, could not be reached for comment.
The avalanche that was to engulf Ascom started in early 2009, when the Kazakh energy ministry notified the company that transfer of TNG's ownership to an affiliated entity in 2003 violated the republic's pre-emptive rights. In April, KPM's general manager Serhei Cornegruta was arrested on the charge of operating a main oil pipeline without a licence and given a four-year jail sentence, of which he served 18 months. Worse was to follow when a court in the Mangistau province ruled that there should be a public auction of KPM's assets to ensure payment of a $145 million fine. In early 2010, the court ordered a freeze on KPM's bank accounts and banned the company from exporting crude oil. The killer blow came in July, when the newly created ministry of oil and gas gave Ascom formal notification that the subsoil contracts for KPM and TNG had been canceled and transferred to KMG under trust management. Ascom says the two companies were given just one day to comply.
As its troubles started to pile up, Ascom struck a deal to sell its two Kazakh properties to a little-known company called Cliffson S.A., which was controlled by Kazakhstan's well-connected Assaubayev family, who were the previous owners of London-listed Kazakhgold. But the deal never went through, partly because the Kazakh government was not prepared to waive its pre-emptive rights over the sale.
Now that it has effectively lost its Kazakh assets, Ascom plans to pursue the Kazakhs in the courts to secure compensation. The company claims to have invested close to $1 billion in Kazakhstan as well as paying over $500 million in taxes and royalties to the government. "We are determined that we secure appropriate compensation for these illegal actions," Ascom said, announcing that it would file for arbitration at the Stockholm Chamber of Commerce under the International Energy Charter Treaty. So far, the Kazakh government has not commented on the affair, but its position has always been that oil companies that do not fulfill the terms of their contracts risk losing their licences.
In a further twist to the story, Ascom subsidiary Tristan is being sued in the District Court of Minnesota by a group of bondholders including investment funds Argo Capital, Black River and Standard Bank. The plaintiffs accuse Tristan of selling in June 2009 $111 million worth of new bonds to a little-known, British Virgin Islands-registered company called Lauren Capital, in violation of an indenture it had signed in 2006. "We are aware of the litigation against Tristan," Ascom's Lungu says. "We are currently considering the matter and cannot make any comments at this stage."
Moldovan Tycoon Takes Kazakhstan to Court
Energy Intelligence, Thursday, September 9, 2010
Paul Sampson, London
Kazakhstan's commercial bust-ups with Western majors such as Eni, BG and Chevron have grabbed the headlines in recent years, reflecting the rise of "resource nationalism" in the republic. But for sheer drama, these disputes cannot match the saga involving a Moldovan oil company, Ascom, which is preparing to challenge the Kazakh government in the international arbitration courts for "expropriating" its oil production assets and transferring them to state oil company Kazmunaigas (KMG).
Owned by Moldova's richest tycoon, Anatoli Stati, Ascom has been active in the Caspian for more than 15 years, firstly as a drilling contractor in Turkmenistan and then as an oil producer in Kazakhstan. In 1999, Ascom bought two prospective Kazakh producers, Kazpolmunai (KPM) and Tolyknneftegas (TNG) and invested heavily in drilling new wells and building infrastructure at the Borankol and Tolkyn fields. In 2006, the company raised more than $300 million when it sold bonds in a special-purpose company called Tristan Oil that were guaranteed against the assets held by KPM and TNG. A second smaller bond issue was held the following year and a third in 2009, raising the total amount to $531 million. The paper carries 10.5% interest and is due for repayment in 2012.
Ascom's fortunes peaked in 2008, when its production in Kazakhstan reached 56,000 barrels per day of oil equivalent -- more than double the previous year's output. The company also announced a major discovery at an adjacent block and at the same time received several bids for its Kazakh assets, including an offer from KMG. It was then that Ascom's troubles started, as the Kazakh government launched a series of attacks on the company that Ascom claims was a "systematic campaign of harassment and illegal treatment."
Ascom pins at least some of the blame on a purported letter sent by former Moldovan President Vladimir Voronin to Kazakh President Nursultan Nazarbayev in which he made "false and defamatory" accusations against Stati, who is considered to be Voronin's rival. Ascom's vice president, Artur Lungu, tells Nefte Compass that Stati asked Moldova's prosecutor-general to open a criminal investigation into the affair and says an inquest is now under way. Lungu claims the arrest of Stati's son Gabriel last year in Chisinau was related to the dispute. Voronin, who stepped down as Moldovan leader in 2009, could not be reached for comment.
The avalanche that was to engulf Ascom started in early 2009, when the Kazakh energy ministry notified the company that transfer of TNG's ownership to an affiliated entity in 2003 violated the republic's pre-emptive rights. In April, KPM's general manager Serhei Cornegruta was arrested on the charge of operating a main oil pipeline without a licence and given a four-year jail sentence, of which he served 18 months. Worse was to follow when a court in the Mangistau province ruled that there should be a public auction of KPM's assets to ensure payment of a $145 million fine. In early 2010, the court ordered a freeze on KPM's bank accounts and banned the company from exporting crude oil. The killer blow came in July, when the newly created ministry of oil and gas gave Ascom formal notification that the subsoil contracts for KPM and TNG had been canceled and transferred to KMG under trust management. Ascom says the two companies were given just one day to comply.
As its troubles started to pile up, Ascom struck a deal to sell its two Kazakh properties to a little-known company called Cliffson S.A., which was controlled by Kazakhstan's well-connected Assaubayev family, who were the previous owners of London-listed Kazakhgold. But the deal never went through, partly because the Kazakh government was not prepared to waive its pre-emptive rights over the sale.
Now that it has effectively lost its Kazakh assets, Ascom plans to pursue the Kazakhs in the courts to secure compensation. The company claims to have invested close to $1 billion in Kazakhstan as well as paying over $500 million in taxes and royalties to the government. "We are determined that we secure appropriate compensation for these illegal actions," Ascom said, announcing that it would file for arbitration at the Stockholm Chamber of Commerce under the International Energy Charter Treaty. So far, the Kazakh government has not commented on the affair, but its position has always been that oil companies that do not fulfill the terms of their contracts risk losing their licences.
In a further twist to the story, Ascom subsidiary Tristan is being sued in the District Court of Minnesota by a group of bondholders including investment funds Argo Capital, Black River and Standard Bank. The plaintiffs accuse Tristan of selling in June 2009 $111 million worth of new bonds to a little-known, British Virgin Islands-registered company called Lauren Capital, in violation of an indenture it had signed in 2006. "We are aware of the litigation against Tristan," Ascom's Lungu says. "We are currently considering the matter and cannot make any comments at this stage."
"Energy Intelligence"
