Kazakh Oil Ministry terminates subsoil contracts of Tristan Oil subsidiaries

July 30. Interfax-Kazakhstan

The Kazakh Ministry of Oil and Gas has cancelled the subsoil contracts of LLP TolkynNefteGas and LLP KazPolMunay, the subsidiaries of Tristan Oil.

“The Ministry of Oil and Gas of the Republic of Kazakhstan has prematurely terminated the subsoil contracts of LLP TolkynNefteGas and LLP KazPolMunay,” the ministry says in a Friday press release.

According to the release, for six months the Kazakh authorities have been demanding that the mentioned companies pay 147 billion tenge (147.58/$1) as compensation for the damage done to the republic as a result of unauthorized operation of the oil and gas pipelines by these companies.

Currently, execution proceedings are ongoing to follow up the decision of the Aktau City Court. The decision has already come and force and requires that LLP KazPolMunay pay 21 billion tenge to the national budget.

The tax authorities initiated an investigation into the illegal entrepreneurial activities of these mineral resource companies and found tax violations. The tax investigation reports have been brought to court.

“In order to prevent bankruptcy of the companies as a result of the execution of the court decisions, which require compensating the damage caused to the state, and as a result of numerous violations of the contractual obligations, as identified by the unscheduled inspection of LLP TolkynNefteGas and LLP KazPolMunay in July this year, the ministry has made a decision to terminate the subsoil contracts with these two companies,” according to the press release.

“On 21 July 2010 the Ministry of Oil and Gas, which represents the interests of the state and makes sure the mineral resource companies comply with the law, the terms and conditions of their contracts and manage the minerals resources in an efficient manner, announced premature termination of the contracts with LLP TolkynNefteGas and LLP KazPolMunay. Under the existing law, the licensed territory has been turned over to JSC National Company KazMunayGas,” the press release says.

According to the Ministry, the former contract holders would not cooperate with the authorities in the person of the Ministry of Oil and Gas and KazMunayGas and hindered access to the financial documents and information on the previous activities the companies had carried out at the fields within their contracts.

“Under the Law on Subsoil and Subsoil Use JSC National Company KazMunayGas, as the body taking over management of the assets at the Tolkyn and Borankol fields and acting in the interests of the state, will ensure protection of the equipment and structures transferred and make sure the assets will operate properly and continuously, the production process and crude supply to the customers will not be interrupted, the existing work places will be preserved and the wages paid in time,” the press release stressed.

Tristan Oil Ltd, incorporated in the British Virgin Islands, was engaged in exploration and development of the Barankol and Tolkyn oil and gas fields in west Kazakhstan through KazPolMunay and TolkynNefteGas.