PetroKazakhstan Inc. - Dispute with Lukoil - New Developments
02 Mai 2005 - 4:01PM
PR Newswire (US)
PetroKazakhstan Inc. - Dispute with Lukoil - New Developments
CALGARY, May 2 /PRNewswire-FirstCall/ -- PetroKazakhstan Inc. (the
"Company") has received a claim letter dated April 29, 2005 (the
"Claim Letter") from its joint venture with Lukoil, Turgai
Petroleum ("TP"). The Claim Letter, addressed to the Company's
production subsidiary, PetroKazakhstan Kumkol Resources ("PKKR"),
states that during the period from January through March, 2005, the
Company has diverted approximately 414,000 tonnes (3.2 million
barrels) of crude oil produced by TP without proper permission as
to the shipment destinations for the crude oil. The Claim Letter
asks that PKKR return this amount of crude oil to TP in kind and
threatens court action in the event PKKR does not return the crude
oil. The Company notes that as of the date of this Press Release,
no court action had been filed by TP. The Company disagrees with
the assertions made by TP in the Claim Letter. In accordance with
the only validly existing decisions on marketing made by TP's Board
of Directors and shareholders (taken in October, 2003), the Company
and Lukoil agreed that TP would begin transportation of crude oil
through the Caspian Pipeline Consortium ("CPC") Pipeline for
further marketing by Litasco, a Lukoil subsidiary. At the same
time, these October 2003 decisions directed TP to sell crude oil to
the Shymkent refinery and also to enter into an "Export Agency
Agreement" with PKKR for the export of TP crude oil volumes. In
addition, under the provisions of the consortium agreement for the
KAM Pipeline, TP was obligated to supply the Shymkent refinery and
the Kazakhstan domestic market with crude oil in proportion to its
share, along with PKKR, of production from the Kumkol field.
Finally, according to the monthly processing plans issued by the
Ministry of Energy and Mineral Resources, TP must supply specified
quantities of crude oil to the Shymkent refinery for the domestic
market. The term of the Export Agency Agreement was tied to the
continued shipment of TP crude oil via the CPC Pipeline. TP
extended these CPC arrangements with Lukoil (without proper
shareholder approval) in December, 2004. Consequently, it is the
view of the Company that the Export Agency Agreement and the
domestic supply arrangements reflected in the October 2003 Board
and shareholder decisions of TP remain in effect and that the
overall domestic supply arrangement reflected in the KAM Pipeline
consortium agreement also remain in effect. The Company notes that,
despite the lack of proper approval by the TP Board and
shareholders, it has not interfered with the export of crude oil
via CPC to Litasco, while reserving its rights with regard to the
unauthorized fee arrangements made between TP and Lukoil. During
the period in question (January - March 2005), TP consistently
refused to act in accordance with the valid instructions from its
Board of Directors and shareholders referred to above. During this
period, in violation of the directives of TP corporate bodies, TP
management refused to sign contracts and associated transfer acts
for sale of crude oil to the Shymkent refinery. In order to avoid
production reductions at TP and disruption of supplies to the
domestic market, PKKR directed a portion of TP crude oil volumes to
the Shymkent refinery. TP has been paid by the Shymkent refinery
for this crude oil in accordance with the agreements made by its
shareholders in October 2003. The Company wishes to point out that
TP has always accepted these payments. Further, TP has been
informed of the disposition of this crude oil by the Company on
several occasions. Based on the assertions made by TP in its Claim
Letter and subject to further investigation by the Company, it
appears that the claim made by TP relates entirely to the volumes
shipped to the Shymkent refinery as described above. Thus, it is
the Company's view that the "claim" described in the Claim Letter
is purely the result of TP management's failure to carry out valid
decisions of its own Board of Directors and shareholders. Not long
after the Company's agreements with Lukoil on TP marketing in
October, 2003 were executed, Lukoil changed its mind and indicated
that it wished to change the marketing arrangements for TP agreed
in October 2003. During 2004, the Company engaged in repeated
negotiations with Lukoil over the marketing of TP crude oil.
Unfortunately, these negotiations did not result in any agreement
to change the procedures for marketing of TP crude oil with the
result that the October 2003 arrangements remain in place.
Nevertheless, it is clear that Lukoil no longer favored the
domestic supply arrangements agreed in late 2003 and has been
acting, in close cooperation with TP management, to have these
arrangements undermined. The Company reminds readers of this Press
Release that it has been involved in numerous disputes with Lukoil,
many of which do not relate to marketing issues. Since late 2004,
these disputes have spilled over to the relationship between the
Company and TP, which is effectively controlled by Lukoil. From the
Company's perspective, the dispute involving marketing of TP crude
oil is fundamentally a corporate governance dispute. As the above
facts demonstrate, TP has been acting on the orders of Lukoil (and,
with the benefit of outside legal counsel hired by Lukoil) for the
sole benefit of Lukoil without due consideration being given to the
views of the Company with respect to the management and activities
of TP. The Company views the effective take over of the joint
venture by Lukoil as a classic example of tactics that investors
have repeatedly experienced in Russia over the past decade and
views the use by Lukoil of these tactics in Kazakhstan as an
unfortunate development. The Company continues to stress that these
disputes should be resolved through international arbitration in
accordance to the shareholders' agreements. The independence of the
arbitration tribunal together with the confidentiality and
professionalism of the proceedings provide the right forum for an
objective assessment of the disputes and sets the right environment
for the exploration of potential mutually agreeable settlements.
PetroKazakhstan Inc. is a vertically integrated, international
energy company, celebrating its eighth year of operations in the
Republic of Kazakhstan. It is engaged in the acquisition,
exploration, development and production of oil and gas, refining of
oil and the sale of oil and refined products. PetroKazakhstan
shares trade in the United States on the NYSE, in Canada on the
TSX, in the United Kingdom on the London Stock Exchange and in
Germany on the Frankfurt Exchange under the symbol PKZ. As of
December 27, 2004, PetroKazakhstan shares began trading on the
Kazakhstan exchange under the symbol CA_PKZ. PetroKazakhstan's
website can be accessed at http://www.petrokazakhstan.com/. Neither
The Toronto Stock Exchange or any other stock exchange or regulator
has approved or disapproved the information contained herein.
DATASOURCE: PetroKazakhstan Inc. CONTACT: Ihor P. Wasylkiw, Vice
President, Investor Relations, (403) 221-8658, (403) 383-2234
(cell); Jeffrey D. Auld, Vice President, Treasurer, +44 (1753)
410-020, +44 79-00-891-538 (cell)
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