No let up in legal battles for PetroKazakhstan

Gary Park

Petroleum News Calgary Correspondent

PetroKazakhstan’s adventures and misadventures in the former Soviet republic of Kazakhstan continued unabated.

The latest blow occurred Feb. 17 in a legal tussle with Kazakhstan’s anti-monopoly agency, which claimed the Calgary-based company received US$91 million in “unjustified revenues” from its 11 oil fields, refinery and pipeline.

In two earlier scraps, the Kazakh agency tried to collect $6.3 million in October, which was reduced to $1 million by a court, and $31 million in November, which was thrown out by the court.

The initial charges involved allegations that farmers were overcharged for diesel fuel during the fall harvest season. The later claim spread to gasoline and other refined products.

In the latest appearance, a court in the Kazakh capital of Astana upheld the competition agency’s claim that PetroKaz distributors made excessive profits.

That ruling, too, will be appealed, said PetroKaz Vice President of Investor Relations Ihor Wasylkiw.

“These allegations are unfounded and there’s no legal basis to them,” he said.

“We continue to operate under the laws of the land and we will continue to have dialogue with the politicians, but the courts will take their course.”

He said PetroKaz petroleum prices are consistent with world prices, with imports from Russia and with gasoline produced by Kazakhstan’s two other refineries.

PetroKaz said in a statement that what it charges for gasoline at its branded service stations are “generally the lowest in every city where they are present.”

The company’s stock fell 2.5 percent on word of the on-going legal wrangle, having earlier made a gain following the appointment of former Canadian Prime Minister Jean Chretien as special advisor to PetroKaz. But, despite Chretien’s reputed international negotiating skills, PetroKaz is uncertain what, if any role he will play.

“We will use any and all resources at our disposal,” Wasylkiw told the Globe and Mail.

Wilf Gobert, an analyst with Peters & Co., told reporters that any suggestion PetroKaz has overcharged by $91 million is “ludicrous,” accusing the Kazakh bureaucrats of taking a heavy-handed approach to scare PetroKaz into submission.

He applauded PetroKaz for its refusal to be bullied, saying the alternative would be unrelenting harassment.