Oil Company OMV Petrom Leaves Kazakhstan

Via The Diplomat, an article on the decision of another investor to leave Kazakhstan, highlighting the worsening business climate:

At the end of December, OMV Petrom sold its assets in Kazakhstan, marking the exit of yet another investor from the Central Asian country, which is still embattled in court spats with other foreign entities.

The sale had been in the cards for months, so the announcement of the sale of OMV Petrom’s subsidiaries – Kom-Munai and Tasbulat Oil – to a local company did not surprise observers. OMV Petrom said in a note that it was divesting from Kazakhstan to channel investments into the Black Sea area.

“The decision will allow us to focus on the Black Sea region,” a company representative confirmed.

Operations in Kazakhstan accounted for around 4 percent of OMV Petrom’s upstream production. The company is owned by Austria’s OMV Aktiengesellschaft (51 percent), the Romanian government (20.6 percent), Fondul Proprietatea (7 percent), and investors in the Bucharest Stock Exchange (21.3 percent). 

Romania’s Petrom, and later OMV Petrom, had operated in Kazakhstan’s Mangistau region since 1998 at the Tasbulat group of fields and Kom-Munai, with the company developing the Komsomolskoye oil field.

Despite having stalled for two decades since the fields were discovered in the Soviet era, geological explorations in the early 1990s had shown optimistic signs for prospective production, galvanizing investors.

Until Petrom completed the takeover in 1998, in fact, the Tasbulat venture had been the protagonist of several obscure deals with foreign companies and offshore investment vehicles.

Tasbulat Oil was formed in early 1997 and registered in the British Virgin Islands with the participation of Romanian investors. In December 1997, an investment company, Kazakhstan Minerals Corporation (no relation to KAZ Minerals), acquired a 40 percent stake in the company through a joint venture between Cyprus’ Gendor and state-owned Mangistaumunaigaz. 

The mid-1990s in Kazakhstan’s oil sector was a period of fast-paced privatization and opaque transactions. As Wojciech Ostrowski aptly wrote in his 2010 book “Oil and Politics in Kazakhstan,” at the time “a joint venture that from the outside looked like an enterprise combining Kazakh and foreign partners was in fact a Kazakh-Kazakh company.”

It seems now that the business environment in Kazakhstan has returned to a period of elite looting of the country’s assets.

OMV Petrom’s licenses to develop the oil fields in Mangistau were acquired by little-known investment vehicle Magnetic Oil, which was set up in October as the transaction was being negotiated.

The companies kept the value of the transaction confidential, making the deal even more opaque.

Open source research revealed that Magnetic Oil is owned by Yelena Tyurina and Bauyrzhan Bisembayev, two investment partners that also own a range of other companies in Kazakhstan. Links to the elite are still the key for doing business in Kazakhstan.

The oil sector, however, is struggling after a year of sustained low oil prices. In May last year, Borealis, a Vienna-based chemical company, dropped out of a joint project with Kazakhstan’s United Chemical Company (UCC) to build a large polyethylene facility in Atyrau. At the time, OMV owned 36 percent of Borealis, but has since increased its stake to 75 percent.

In December 2020, KLPE, a joint venture between UCC and Polymer Production ultimately owned by state-company Kazmunaigas, agreed to build a gas separation plant with Tengizchevroil, the consortium developing Central Asia’s largest onshore oil field. 

On February 10, JGC Holdings Corporation, a Japanese firm announced that it would be in charge of the Front End Engineering and Design (FEED) project for the plant.

After a rough 2020, Tengizchevroil is trying to catch up with its plans, which were delayed by the pandemic and the oil crisis. The oil venture developing the Tengiz oil field is the largest taxpayer in Kazakhstan and its production and expansion plans are crucial for the regional economy of the Atyrau region, as well as the national budget.

With the oil price rebounding in the past weeks, the oil sector in Kazakhstan continues to show an unpredictable volatility, which reflects on the national economy, still too dependent on hydrocarbon resources.

This entry was posted on Monday, February 22nd, 2021 at 8:52 am and is filed under Kazakhstan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

Comments are closed.

About This Blog
Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.