“On July 22nd, 2016, both JSC National Company KazMunayGas (KMG) and KMG International N.V. (KMGI) submitted to the Romanian authorities a Notice of Investment Dispute based on the Agreement between the Government of Romania and the Government of the Republic of Kazakhstan, the Agreement between the Government of the Kingdom of the Netherlands and the Government of Romania and the Energy Charter Treaty,” KazMunayGas stated.
The arbitration dispute concerns the treatment applied by the Romanian authorities to the investments performed by KMG and KMGI in their Romanian subsidiaries, namely: Rompetrol S.A. (now Oilfield Exploration Business Solutions S.A., Oilfield), Vega S.A. (Vega), Rompetrol Rafinare S.A. (RRC) and other related Romanian companies.
KazMunayGas companies have already invested around $4billion (including the acquisition price of the Group by KazMunayGas NC) of spending inside the country with plans to direct billions more in funds to plants, facilities and communities where the Group does business.
“We always stand ready to explain to the Government of Romania the need for our investments to be protected as a matter of legal obligation under law. We are committed to continue investment in Romania and building on the significant work we have already done. However, we cannot put further capital at risk unless and until the authorities demonstrate respect for rule of law. If no solution is found, we are compelled to use all legal means to defend our rights and obtain compensation and that includes international arbitration against the State. However, we sincerely hope that an amicable solution can still be found with a view to allow us to continue investments in Romania so as to contribute to Romania’s objective of becoming a major energy hub in the Black Sea region,” said Azamat Zhangulov, KMG International Senior Vice President.
The company said that, further to the submission of the Notice of Investment Dispute, should a settlement between KMG and Romania fail to be reached, the case will be referred to and settled by the International Centre for Settlement of Investment Disputes under World Bank, headquartered in Washington, D.C or to the Arbitration Institute of the Stockholm Chamber of Commerce, in line with the provisions of the treaties and with KMG companies’ envisaged reliefs and measures to be obtained.
According to Financial Times, KazMunaiGas initiated legal proceedings against Romania after prosecutors froze its shares in the country’s largest oil refinery, disrupting plans to sell a controlling stake to a Chinese company.
In April, KazMunaiGas agreed to sell 51% in KazMunaiGas International to Chinese company CEFC, for $680 million but a few days later, Romanian organized crime prosecution department DIICOT said it started investigations in a case involving oil company Rompetrol, and froze its assets.
KMG International, owned by KazMunayGas Kazakhstan, conducts major operations in refining and petrochemicals, retail, trading, upstream and industrial services in 12 main markets. In Romania, the Group operates Petromidia Navodari refinery, with a processing capacity of 5 million tons per year, Vega Ploiesti Refinery – the oldest unit of its kind in operation since 1905, but also a fuels distribution network of over 700 distribution points, 230 LPG stations, 9,000 cylinders distribution points, 3 LPG filling stations and 6 warehouses.