Kazakh assets in Georgia sold to offshore company

Waltbay Ltd, registered in Marshall Islands, which is a subsidiary of the Georgian business group Caucasus Business Solution (CBS), has become the new owner of KazTransGas-Tbilisi.


Share on Facebook
Share on Twitter
Share on Google+
Share on LinkedIn
+

The long history associated with the purchase of the gas distribution station in the capital of Georgia, Tbilisi, by Kazakhstan’s national company KazMunayGaz, has finally come to an end.

The Marshall Islands-registered company Waltbay Ltd, which is a subsidiary of the Georgian business group Caucasus Business Solution (CBS), has become the new owner of KazTransGas-Tbilisi, Georgia’s Channel One reported.

The cost of the deal has not been disclosed.

The company explained that the acquisition of shares using an offshore company was made to simplify the sale process. The offshore subsidiary will soon transfer the share of KazTransGas-Tbilisi to its parent company registered in Georgia.

In 2007, KazTransGas bought the station, which was in a very poor condition. The Kazakh side has invested in its modernisation over $100 million. “Then in 2008, when we had a lot of money, the price of oil went up to $100, some people, I will not give names, decided to make these investments, although any investments are a risk, but this asset was the riskiest, ” Yermukhambet Yertysbayev told reporters last year when he was still Kazakhstan’s ambassador to Tbilisi.

Yertysbayev explained that initially it was planned that the Kazakh gas would go to Georgia through Russian pipelines but Moscow’s invasion of Georgia during the brief five-day war in August 2008 destroyed this scheme.

“Our management was in a difficult situation. The gas was needed by millions of residents of Tbilisi, the Kazakh company had to buy it in Azerbaijan under a different tariff. We flew into a debt of $40 million. The Kazakh side does not agree that it is its duty, but the Georgian side thinks otherwise. Before my arrival as ambassador to Georgia…the Almaty City Court decided in favour of KazTransGas, and the Kutaisi Court (in Georgia) in favour of its country. The question was frozen,” Yertysbayev said.

Last year, the total expenses of the Kazakh side amounted to $160 million. When the new leadership of KazTransGas decided to file in the London Arbitration Court, the Georgian side came to the realisation that it could lose and later took steps to “amicably” resolve the protracted dispute as the debts that had been received were then written off.

Only 10 years later, Kazakhstan was able to get rid of its asset.

Batumi terminal loses value

If everything is clear with KazTransGaz-Tbilisi, then the fate of the second Kazakh asset in this country, the Batumi terminal, remains unknown. A potential buyer who is already conducting an assessment of the property of this object has already emerged.

“This time the buyer is not a stranger, that is, not from the outside, but one of the ‘daughters’ of KazMunayGas (KMG). That is, the terminal will remain as one of the possessions of the national company. But it is too early to say anything concrete,” an informed source said on condition of anonymity.

However, sources in Tbilisi reported that Rompetrol (also owned by KMG, or rather its ‘daughter’ of KazTransOil) could become a buyer. Given the fact that oil can be supplied through the Batumi terminal to the refinery in Constanta across the Black Sea in Romania, there is a degree of logic in choosing Rompetrol. But the question arises, why is this asset sold for all the same?

In 2008, the terminal in the Batumi port acted as direct access for Kazakh oil to be transferred through the Black Sea to the markets of the Middle East and Europe.

The situation has, however, seriously changed in recent years. Initially, the volume of transhipment of Kazakh goods, including oil products and grain, would have been about six million tonnes per year.

Until 2015, the company somehow retained this level, but now the CPC pipeline has gone online and oil from Kazakhstan goes straight to the world markets through Russia. It is faster and cheaper than the Caspian-Caucasus route through Azerbaijan and Georgia to the Black Sea.

The Batumi terminal shifted to the transhipment of phosphate fertilizers, steel, and iron in recent months, which requires a change in the intergovernmental agreement. They have also decided that the shipment of Ukrainian and Russian grain is a more optimal option as the supplies are closer geographically that those from Kazakhstan.

According to Yertysbayev, another problem has emerged that could make Kazakhstan’s purchase of a terminal in Batumi unprofitable. Georgia’s decision to build an entirely new deep-water port – their fourth – between the cities of Anaklia and Kulevi, which a short distance from Georgia’s breakaway region of Abkhazia, has changed the calculus as China has opted to support the Georgian government.

“China intends to take part in the construction of a new port in Georgia. Once this project is completed, the port of Batumi will be open only to passenger ships, which will transform the city of Batumi a purely tourism-based destination, ” Yertysbayev said.

 

Share on Facebook
Share on Twitter
Share on Google+
Share on LinkedIn
+