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Oil & Gas

Is Kazakhstan Preparing to Take on the Oil Consortium “Whales”?

The filed lawsuits and environmental claims totaling $159.6 billion against the consortiums operating the Kashagan and Karachaganak fields reflect the Kazakhstani government’s intention to revise the largest oil & gas contracts. Kazakhstan, due to drought in Central Asia and a drop in oil production after the expiration of major oil & gas contracts by 2040, will likely look like Arrakis, the fictional desert planet from Dune: Part Two over whose valuable commodity the Great Houses struggle. Meanwhile, the Dune sandworms, which produce the spice needed by all the planets, resemble the consortiums developing the Tengiz, Karachaganak, and Kashagan fields – just as huge and just as rare, with almost no such production sharing agreements (PSAs) with 40-year stabilization contracts left in the world. In Kazakhstan, the three operators are known as the “three whales.” What’s going on At the beginning of April 2024, Bloomberg published an article about the claims exceeding $16.5 billion brought forward by Kazakhstan, through PSA LLP, against the consortiums North Caspian Operating Company (NCOC), which is developing the offshore Kashagan field, and Karachaganak Petroleum Operating (KPO). The environmental regulator for the Atyrau region has additionally filed a claim for $5.1 billion against NCOC, while another lawsuit for $138 billion of lost revenue has been launched. Consortium Amount of PSA claim Environmental fine Total NCOC $13 billion + $138 billion $5.1 billion $156.1 billion KPO $3.5 billion $3.5 billion The total amount is possibly the largest in the world for the oil & gas sector. Since 2016, PSA LLP has been the authorized state institution in the production sharing agreements for NCOC, KPO, and the Dunga project (previously owned by Total E&P Dunga GmbH; in November 2023, the state-owned KazMunayGas bought the TotalEnergies stake for an estimated $300 million). Kazakhstan’s Ministry of Energy is currently entrusted to run PSA LLP, while the stakes in Karachaganak and Kashagan are held by KazMunayGas (KMG) and the sovereign wealth fund Samruk-Kazyna (SK). The international arbitration claims followed inspections in 2013-20 that revealed costs not agreed upon with the Kazakhstani government (costs are reimbursed from oil revenues), along with failure to hit planned oil production targets and violations during tenders, etc. The initial amount of the lawsuit against NCOC was raised from $13 billion to $15 billion. The new claim for $138 billion relates to lost revenue “reflecting the calculation of the value of oil production that was promised to the government but not delivered by the field developers,” Bloomberg reported, citing sources familiar with the matter. The $5.1 billion fine levied by regional environmental regulators against NCOC has to do with the storage of excessive amounts of sulfur on site (more than a million tons more than permitted), as well as 10 other Administrative Code violations. Later, however, a court partially satisfied the consortium’s appeal. Deputy General Director of PSA LLP Nurlan Serik has made clear that Kazakhstan intends to challenge the consortium’s costs and failure to fulfil plans only through courts. According to various estimates, about $60...

Kyrgyzstan Strengthens Protection From Family, Sexual, and Gender Violence

The President of the Kyrgyz Republic, Sadyr Japarov has signed a law aimed at strengthening the protection of its citizens from family, sexual, and gender violence. The law provides for amendments to several legislative acts and aims to provide comprehensive assistance to victims of various forms of violence. A key objective is to ensure victims' access to justice and protect their rights and interests. The law is being adopted due to the alarming situation with the level of family and gender violence in Kyrgyzstan. In 2021, more than 10,000 cases were registered, but only 2.5% of them proceeded to court. In 2023, the number of cases increased to 11,000, and 95% of the victims were women. The increasing number of such incidents and the lack of protection for victims necessitated a review of the relevant legislation. The new law is designed to address gaps in legal protection for victims and create stricter measures to punish perpetrators.

Kyrgyzstan, Kazakhstan Urge Nationals to Avoid UK Cities Hit by Violence

Some Central Asian countries have warned their citizens to avoid cities in the United Kingdom where anti-immigrant riots have erupted since late last month. Kyrgyzstan urged its nationals to “temporarily refrain from visiting the cities of Rotherham, Bolton, Blackpool, Hull, Bristol, Stoke-on-Trent, Belfast, as well as the suburbs of Manchester and Liverpool until the situation in these regions stabilizes,” the Ministry of Foreign Affairs said Thursday. “At the same time, citizens of the Kyrgyz Republic currently located in the specified settlements should observe increased security measures, be vigilant and careful, refrain from visiting crowded places and follow the latest news,” the ministry said. It listed +44 7341 185777 as an emergency telephone number, accessible via WhatsApp, for Kyrgyz citizens. Kazakhstan’s embassy has issued similar advice, saying there are emergency contact lines for Kazakh citizens in the United Kingdom as well as their relatives in Kazakhstan. It listed +44 7900 511 535 as an emergency number. Riots in Britain started after the stabbing murders of three girls at a children’s dance event in the coastal town of Southport near Liverpool on July 29. Hundreds of people have been arrested in violence that police say was stirred by agitators promoting anti-immigrant sentiment. Some of the mobs attacked mosques. Despite fears of more unrest, Wednesday night was relatively peaceful as thousands of police officers and anti-racism protesters mobilized to head off the threat.

Uranium Lawsuit Against Kyrgyz Government To Be Considered in Washington, D.C.

A case against the Kyrgyz authorities will be heard in Washington, D.C. in November 2024. At the end of 2022, International Mining Company Invest Inc. - which is headquartered in the U.S. - filed a lawsuit in international arbitration, accusing the Kyrgyz authorities of illegally expropriating investments. The company estimated its losses at $63 million. In 2009, International Mining Company Invest Inc. received the right to use subsoil for geological exploration. In 2013, the country's authorities issued a license to the foreign company to search for uranium and other metals at one more site. International Mining Company Invest Inc. carried out work in three regions of the republic; however, in 2019, a moratorium on exploration and development of uranium and thorium deposits was introduced. The company lost its license and initiated arbitration proceedings at the International Center for Settlement of Investment Disputes. Speaking at a press conference in Bishkek, Kyrgyz Justice Minister Ayaz Baetov said the case will be heard in international arbitration in Washington in November 2024. "The so-called uranium moratorium was the reason for this case's emergence. The case is now being considered. We have our arguments; they have theirs," the official stated. The previous authorities imposed a moratorium on the mining and exploration of uranium and thorium deposits; the new administration lifted the ban, but announced that Kyrgyz companies would develop the deposits.

The Fall and Fall of Salim Abduvaliev – Kyrgyz Authorities Place Uzbek “Kingpin” on Wanted List

The State Committee for National Security of Kyrgyzstan (GKNB) has issued an arrest warrant for the already imprisoned 73-year-old Salim Abduvaliev, who for decades was one of Uzbekistan's most prominent individuals. As part of the investigation, evidence was obtained that Abduvaliev had financed the activities of an organized criminal group led by Kamchybek Asanbekovich Kolbaev, an individual linked to heroin trafficking who was wanted by the U.S. Department of State and was a member of the international criminal group, the "Brothers’ Circle," or “Bratva”. Kolbaev was killed in Bishkek in a security operation in October 2023 at the age of 49. In a dramatic fall from grace, in March of this year, Abduvaliev was sentenced to six years in prison in Uzbekistan for “arms trafficking”. Initially a fan of President Mirziyoyev, even being photographed wearing a t-shirt proclaiming “My President” emblazoned with Mirziyoyev’s image, Abduvaliev eventually fell afoul of reforms and a crackdown on corruption. “Whether it is criminal groups… or officials mired in corruption, if someone flouts the law and causes harm to the state and society, we will never be able to stand by and watch it,” Mirziyoyev said in December 2023. “In ‘New Uzbekistan,’ the law must prevail, and punishment for crimes must be inevitable”. Having been hugely influential in CIS countries for decades, Abduvaliev now also stands accused in Kyrgyzstan of establishing illegal channels for transporting narcotics to Europe. According to the GKNB, Abduvaliev regularly provided material support to Kolbaev and helped him to become the leader of the Kyrgyz criminal world and rank among the most influential criminal figures in the region. In their indictment, the GKNB stated that Kolbaev and Abduvaliev had a close relationship; pictures showing Kolbaev’s visits to “celebrations and other events” organized by Abduvaliev in Uzbekistan number among the evidence. Based on the collected materials, Abduvaliev was placed on the interstate and Interpol databases by the Oktyabr District Court of Bishkek. Widely-known as "Salimboy-Boyvaccha" (which can be used to mean “grandfather”, “rich man”, or “dandy”), Abduvaliev previously held the position of Vice President of the National Olympic Committee and President of the Wrestling Association of Uzbekistan. He was also an associate of the mob boss, Gafur Rakhimov, considered to be one of the most prominent drug lords in the CIS. [caption id="attachment_21414" align="alignnone" width="700"] Image: GKNB of the Kyrgyz Republic[/caption] A mainstay of Central Asian crime circles, Abduvaliev was in the aluminum business with the notorious Michael Cherney – declared by the FBI to be an “organized crime figure” - sponsored the participation of Anatoly Bykov – since jailed for murder - in elections in Krasnoyarsk Krai in Russia. A 2012 article in Argumenty I fakty cites an “FBI Organized Crime” report as stating that in 1987, when Mikhail Cherney came to “conquer Moscow,” he came with “recommendation letters [from] respected” Tashkent businessmen known by their nicknames, Gafur and Salim.” A well-connected source who wishes to remain anonymous for their safety told TCA that “in Uzbekistan there was no single business...

Kazakhstan Resolves Dispute with Stati Amid Allegations of Litigation Profiteering

Kazakhstan’s government and representatives of the Stati family have reached an agreement to cease all legal proceedings regarding the case (Republic of Kazakhstan v. Ascom Group SA) with approval from major creditors, including an offshore investment vehicle of the Stati parties called Tristan Oil Ltd. The Stati side includes the family, as well as investors in Argentem Creek Partners (the investment manager of funds that lent money to Tristan Oil), and other possible shareholders. While the agreement comes after a fourteen-year dispute over oil and gas assets in Kazakhstan, its precise details remain confidential. Daniel Chapman, CEO of Argentem Creek Partners, was quoted in the Ministry of Justice statement as saying: “We support the framework agreement and commend President Tokayev’s decision to create a Fair Kazakhstan as part of his admirable reforms. With the settlement of this dispute, Kazakhstan is honoring international treaty obligations and, thereby, opening its doors to increased investment and heightening its economic growth potential. We welcome this new era for Kazakhstan.” Kazakhstan’s Minister of Justice, Azamat Yeskarayev said the agreement “was made in view of the public interest and does not involve the spending of budgetary funds,” and added: “We believe that this move will have a positive effect on attracting new investments in our country and on the growth of the economy.” A brief history of the dispute In 1999, Tristan Oil Ltd., an offshore company, was granted exploration and production rights at the Borankol oil field and the Tolkyn gas field located in the Mangistau region of Kazakhstan through the acquisition of Kazpolmunai LLP and Tolkynneftegaz LLP in the same year. Additionally, Tristan Oil Ltd. made investments towards the construction of a modern liquefied gas processing plant to become operational by the end of the 2000s. In 2010, assets of the Stati family were nationalized with the authorities citing their unlicensed activities, and were transferred to the trust management of KazMunayGas JSC structures. Moldovan businessmen decried the seizure as violating provisions of the Energy Charter Treaty, filed lawsuits claiming illegal seizure of their property, and began a legal battle in international jurisdictions that lasted for fourteen years. This event became a core component of the Republic of Kazakhstan v. Ascom Group SA case involving Tristan Oil Ltd. Kazakhstan’s representatives claimed that Stati’s creditor, Argentem Creek Partners, had conspired to enforce a tainted award. However, the lawsuit was dismissed by the Supreme Court of Sweden in a final June 2023 decision awarding $497.6 million to Stati parties. The court's decision mandated the Kazakhstan Government to disburse the initial instalment of approximately $76 million to the Stati family, along with accrued interest based on six-month U.S. Government bond rates, starting from April 2009. Additionally, the ruling included an allocation of $1.5 million to cover legal expenses. Despite the final and binding decision in Sweden, the legal battle showed no signs of abating, with cases continuing in England, the U.S., the Netherlands, Luxembourg, Belgium and Italy. The Ministry of Justice of Kazakhstan appeared intent on prolonging...