Nine years ago, in the Balkans, three important facilities started
operating under the Kazakh flag, namely, the refineries of Rompetrol
Petrochemical Holding on the Black Sea shore of Romania.
Rompetrol includes three refineries: Petromidia, Vega and Rompetrol
Petrochemicals, as well as over a thousand gas stations throughout
Europe. KazMunayGas (KMG) had explained its decision to purchase the
major oil and gas holding in Romania by the desire to enter the European
refinery market.
Today, the holding operates under a new name – KazMunayGas
International NV (KMGI). Over the last two to three years, this foreign
asset has been under a close attention of the media.
There are several reasons for that. First, this asset had been part
of a large-scale privatisation by the government of Kazakhstan. Second,
the largest Chinese investor has decided to buy the controlling stake it
in. Third, the pending sale has triggered a renewed and even fiercer
dispute around the old claims of the Romanian government to Rompetrol.
KMGI Deputy Director General
Azamat Zhangulov talked to
New Europe in an interview about his company’s plans regarding its investment in Romania and the Balkans region.
NE: Mr. Zhangulov, how are things with the financial claims of the Romanian government to Rompetrol?
Azamat Zhangulov: In early May this year, the
prosecutor’s office of Romania brought up criminal claims against 14
KMGI employees. Based on the financial claims, Romanian prosecutors
froze $2.1 billion worth of KMGI assets.
The current accusations of the Romanian authorities relate to the
2000 privatisation of Rompetrol Rafinare, as well as to the 2003
agreement between the government of Romania and the management of the
then Rompetrol Group on restructuring of historic debt into bonds.
In 2007, when KMG bought the 75% stake of The Rompetrol Group NV, the
deal had been approved on all levels in Romania as well as by the
European Union.
At the time of the purchase of the Romanian assets, KMG had not been
officially informed about an ongoing investigation into a 1998-2003
case. KMG, therefore, considers itself an honest buyer and, from the
legal perspective, finds the current accusations for the actions of the
previous owner unfounded.
KazMunayGas and KazMunayGas International NV intend to use their
legal rights under the local and international law to protect their
capital investment made since the purchase of the company.
Consequently, on July 22, the company submitted to the Romanian
government a notice of investment dispute under the Agreement between
the Governments of Romania and Kazakhstan, the Agreement between the
Governments of the Kingdom of Netherlands and Romania, and the Energy
Charter.
If the dispute is not resolved within 3 to 6 months of receipt of the
aforesaid notice, the company has the right to go to international
arbitration.
NE: In that case, what is the current status of approval
by the European regulatory agencies of the sale of 51% in KazMunayGas
International NV to China CEFC Energy Company Limited? It was reported
earlier that the deal was expected to close by October 2016. Not much
time is left.
AZ: As reported earlier, the freezing of the assets
by Romania’s special prosecutor’s office has complicated the progress of
the deal. We are in ongoing negotiations with the CEFC on the
conditions of the deal pertaining to the investigation.
We have already received confirmation from our partners about their
unchanged intention concerning the format and conditions of the
agreements. But the new circumstances will have to be taken into
account.
In the meantime, we are finalising with our partners the investment
initiatives for strategic partnership, and we are working on preparation
of the new projects for implementation.
NE: After a final approval of the sale, KMG with be left
with just 49% in the Romanian asset. Legally, such distribution of
shares means the Chinese will have the controlling interest. Does this
mean that KMG will lose its right of “final say” in critical decisions?
AZ: the Shareholders Agreement regulates the
relationship between the partners. According to it, the key decisions
should be made unanimously. Therefore, no critical decision will be made
without KMG’s input.
Furthermore, CEFC relies on KMG’s expertise in this business and on
the national company’s support in the organization of crude supplies for
the joint venture. The partnership will act in the interests of both
parties and, consequently, their respective interests will be fully
taken into account.
NE: Commenting on the sale earlier, KMG head Sauat
Mynbaev said that “in a union with a strong investor, KazMunayGas can
make a serious breakthrough using KazMunayGas International (Rompetrol)
as a common platform to develop the business”. Can you please clarify
what breakthrough we are talking about? Is it increased refining
capacity, product line expansion, or increased share in the retail
market (expansion of the gas station network) in the Balkans, and not
just in Romania?
AZ: The new partnership is directed at establishing
and developing a long-term, strategic international joint venture based
on the operations and assets of the KMGI group in the promising markets
of Europe.
Our main goal is to expand the trade of crude oil and petroleum
products in Europe. This partnership creates an attractive platform, on
the basis of KMGI, for future joint projects principally in the European
oil and gas sectors.
The main areas in which the future projects will be developed include
oil refining, wholesale and retail sale of petroleum products,
infrastructure, logistics, and other operations related to the company’s
core business.
NE: Apart from Austria’s OMV concern and Russia’s LUKoil,
what other energy companies are present today in the Balkans’ retail
fuel and lubricants market? Who could be the potential competitors?
AZ: As you know, since the acquisition of Rompetrol,
KMG has made sizable investment in the oil refinery capacity upgrades,
development of logistic infrastructure, and expansion of the retail
network, which has earned the company a status of an “energy bridge”
connecting the resources of Central Asia to the promising European
markets.
Now, together with the Chinese investors, there is an ambitious plan
to realize the next stage of the company’s development. The plan
includes strengthening and expansion of presence of flows of crude oil
and oil products on the basis of Kazakhstan’s crude oil in the Black Sea
region and Europe.
As far as competition is concerned, we are already the best in
product and service quality there. We hope that the new projects will
reinforce our competitiveness. As a result, we plan to become a leader
in the European market of petroleum products.
NE: Would KMGI’s strategy change with the arrival of the
Chinese partner? Specifically, we are interested in the loading chart of
Petromidia refinery. If so, what changes are expected?
AZ: We are not expecting any change to the loading
chart of Petromidia refinery. The partnership will be using each
partner’s strengths: KMG’s capabilities to supply crude oil, and CEFC’s
capabilities to invest in business development. KazMunayGas will
continue to benefit from Petromidia’s strategic location on the Black
Sea coast to supply crude from Kazakhstan and to fully load the refinery
capacities.
https://www.neweurope.eu/article/kazakhstan-seeks-international-arbitration-ruling-investment-romania/