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Oil Patch Insider Phipps stepping into front lines of an energy showdown
He’s never been to Kazakhstan, which may seem like strike three for Graeme Phipps before he even steps up to the plate to become president and chief executive officer of PetroKazakhstan, the one-time Canadian junior that is up to its neck in turmoil in the former Soviet republic.
But 52-year-old Phipps brings a wealth of oil patch experience — including 20 years in senior posts with Imperial Oil, Petro-Canada and Nexen — and an entrepreneurial toughness that is rumored to have seen him sleep in an equipment closet to save money while working as a janitor during his student days at the University of Alberta.
He’ll likely need all of that resilience and more as he steps into the shoes being vacated by Bernard Isautier, the turnaround artist who pulled PetroKaz from the brink of bankruptcy five years ago and steered it to a market peak of $3.5 billion earlier this year.
The French-born Isautier, who will remain as PetroKaz chairman, was handsomely rewarded for his efforts, pocketing $93.1 million last year, of which $92.6 million came from exercising stock options.
He’s turning over the operational controls at a time when the company’s turbulent dealings with Kazak authorities show signs of worsening.
Even Isautier conceded at this month’s annual meeting of shareholders that PetroKaz’s joint venture with Russian oil giant Lukoil has turned into a “monster” that could end in a hostile takeover if “clearly coordinated” attacks on the company succeed in artificially depressing stock prices.
A pattern for such unsavory dealings was established 2001 when Lukoil forced a takeover of Bitech, just as the small Canadian oil company was starting to make headway as an oil explorer in northern Russia.
The stakes for PetroKaz are far higher.
“We are currently facing some major challenges,” Isautier told shareholders. “We have made a number of concessions, but there are limits.”
The pivotal showdown for PetroKaz is its clash with Russian oil giant Lukoil, the sixth-largest producer in the world.
The two companies are nominally joint partners in Turgai Petroleum, which has the capacity to pump 170,000 barrels per day from a prolific field in southern Kazakhstan.
At issue is how much oil is being exported and how much is finding its way to a PetroKaz-owned refinery, with Lukoil alleging that PetroKaz has effectively stolen millions of barrels to fuel its refinery.
PetroKaz claims Lukoil is working to undermine domestic supply agreements negotiated in 2003 and has embarked on an effective takeover of Turgai, using “tactics that investors have repeatedly experienced in Russia over the past decade.”
It wants the disputes resolved through international arbitration in accordance with shareholders’ agreements.
Meanwhile, amid the whirl of legal action, Kazakhstan authorities have demanded that PetroKaz slash its output by 50,000 bpd until it stops gas flaring — an order Isautier views as discrimination against a foreign company.
“But I’m confident that in the end reason will prevail,” he said.
More than anyone, Phipps will hope that’s the case.
For now, he’s pleased to have Isautier “stick around for the next three months, to wrestle a bit, help mentor me and allow me to get up to speed.
“I’m going to patiently work from the sidelines and with Bernard to better appreciate the issues. I think it’ll be an interesting challenge.”
But, unless “reason” does prevail, Phipps might be looking to beat a retreat to the janitor’s closet of his past.
Isautier has much more appealing escape options. He owns a small island in the South Pacific near Tahiti.
—Gary Park Heyworth, Sullivan reappointed to ANGDA board On May 11 Scott Heyworth told Petroleum News that he and Dan Sullivan had both been reappointed by Gov. Frank Murkowski that morning to the Alaska Natural Gas Development Authority’s board of directors.
According to statute the term of those seats is three years.
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