Everything was written off and still remained indebted to all

By Laura Suleimenova

The ecological penalty for this emission at Kashagan was transferred as investments to EXPO-2017. D Island. August 26, 2013. Photo from “AkZhaik” archive.“Ak Zhaik” has learnt the details of the agreement signed on December 13, last year between the Government of Kazakhstan and Kashagan project Operator – NCOC. Kazakhstan has actually “written off” consortium’s multi-billion ecological penalty in exchange for investments into EXPO-2017.

“EVERYTHING WAS MIXED UP IN THE NORTH CASPIAN HOUSE”

Let us remind, NCOC and Agip KCO prior to the signing of this agreement challenged in the courts the legality of the instruction issued by the Atyrau regional department of ecology about compensation of 134,2 billion tenge ecological damage for burning of sour gas during the trial start of Kashagan project. Then as the result of several leaks on the gas pipeline going from D island (at Kashagan) to Bolashak plant, nearly 2,8 million cubes of sour gas were flared at the plant flare stack. Both foreign companies appealed to specialized inter-district economic court, then to appeal board of the regional court, then to cassation board of the regional court, and all these agencies left the complaint without satisfaction (see “Here and now 134 billion”, “Court ruling orders NCOC and Agip to pay 134 billion in environmental fines” , “In an anticipation of billions in environmental fines”).  The companies have paid earlier 222 million tenge for the leak of gas into the atmosphere during the pipeline accident on September 24, 2013, and also a few administrative penalties as a result of various charges for the total amount of over 10 billion tenge.

To recall, at the end of December of last year the first Vice-Minister of Energy of Kazakhstan Uzakbai Karabalin, without revealing the details of the agreement, concluded a moment before, told our newspaper that in Kazakhstan “subsoil users are fined twice and even three times for one and the same violation”.

“There is no such practice in the world, of course, and we are going to improve our legislation so that it corresponds to world practice", - said the minister then. In other words, he let us know that the claims of the consortium to the Kazakhstan party regarding penalties are partially justified.

Before, in June of last year, the Consortium made its move by sending to the Kazakhstan party “notification about dispute”. The consortium claimed that, despite the zero rate on VAT specified in Production Sharing Agreement (PSA) both for the consortium and its contractors, the tax authorities of Kazakhstan several years in a row sent the relevant bills to the project participants. The untimely payment of VAT would mean the arrest of all their bank accounts and, actually, the freezing of the company activities. In their “notification” the consortium stated that the amount of VAT that was mistakenly paid to the budget by the partners and their contracting companies is much higher than the ecological fine of 134 billion tenge, ruled out by the court. There is information that the American company “ConocoPhilips” also demands the return of VAT, although it already sold its share in the project. 

10 BILLION - AND THAT'S THAT

All these twists and turns ended up in signing of the agreement between the RoK Ministry of Energy and NCOC on December 13 of last year, about which in the official press release NCOC wrote the following: “The Republic of Kazakhstan, NCOC and NCPSA participants settled a number of production, financial and environmental issues that developed in the last several years. The terms of the agreement are confidential.

The consortium agreed to continue the financing of social infrastructure projects in Mangistau and Atyrau Oblasts, as well as to give financial support to the organization of  EXPO-2017in Astana”.

And as we learnt, the essence of “the settlement of environmental issues” in the agreement was that penalties in the total amount of 10 billion 287 million tenge that was already paid by the consortium for the consequences of September 2013 accident, have been offset by the Kazakhstan party as “a full compensation of ecological damage connected with any cases of gas flaring and related emissions during the period from 11.12.2012 till 28.01.2014”. Thus, here is no talking about 134 billion tenge any more. Besides, the RoK Ministry of Energy took the obligation to consult with NCOC about the possible changes in the legislation concerning gas flaring and emissions – “considering special ecological conditions of the Caspian Sea and the differences between regulatory bases of the republic and other countries”.

As for VAT, then the Kazakhstan party, based on the results of tax audits, will compensate to the consortium and its contracting companies, the amounts that they earlier paid to the budget by June 30, 2015. For each day of delay the Kazakhstan party will be charged with penalty fee.

In its turn, NCOC will continue the financing of social infrastructure projects in Atyrau and Mangistau Oblasts. And according to the additional arrangement the consortium in 2015 will finance the construction of the international exhibition “Astana EXPO-2017” with $50 million. To recall, earlier the head of Astana EXPO-2017 national company Talgat Ermegiyaev announced that the cost of holding the exhibition will make about $3 billion.