Petrokazakhstan (NYSE:PKZ)
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Lukoil asks Kazakh Court to invalidate a signed International
Arbitration agreement with PetroKazakhstan regarding the KAM pipeline
CALGARY, May 24 /PRNewswire-FirstCall/ -- PetroKazakhstan Inc. (the "Company")
announces that Lukoil Overseas Kumkol B.V. ("Lukoil") and the Company's joint
venture with Lukoil, Turgai Petroleum ("TP") have filed a claim in which both
Lukoil and TP seek to invalidate the international arbitration provisions
contained in a written and signed agreement between the Company, the Company's
subsidiary AO PetroKazakhstan Kumkol Resources ("PKKR"), Lukoil and TP, in
relation to the Kumkol - Dzhusaly Pipeline (the "KAM Pipeline").
The case is currently scheduled to be heard on May 27th by the KyzylOrda Oblast
Court.
The KAM Pipeline was formed as a consortium between PKKR and TP in December
2002. The Company as well as PKKR, Lukoil and TP signed agreements related to
the consortium. TP has been shipping and continues to ship part of its
production through the KAM pipeline, achieving substantial transportation costs
savings.
Consistent with international practice, the parties have voluntarily agreed to
submit the resolution of their disputes to international arbitration. Any
resultant arbitral award will be recognized and enforced under the terms of the
1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, an international convention signed by Canada, the Republic of
Kazakhstan and Russia.
There are very rare exceptions under which a signed and binding international
agreement to arbitrate will not be recognized. The Company does not believe any
of these exceptions apply in the current context. Nevertheless, Lukoil and TP,
having signed and agreed to international arbitration, have filed a claim in a
Kazakhstan court asserting that one of these agreements violates Kazakhstan law
based on the tenuous argument that it relates to the ownership of
Kazakhstan-based immovable property (real estate) and is, therefore, exempt
from international arbitration.
The Company believes that Lukoil's goal is to cause TP to exit from the KAM
Pipeline consortium as a co-investor, without fair compensation for its use to
date, and to continue to use it in the future by forcing the Company to provide
access to the KAM Pipeline as a regulated pipeline. The Company observes that
this would be in line with Lukoil's overall business tactics, which appear to
be oriented to receiving the benefits of PetroKazakhstan's investments without
having to participate in their costs or to pay fair compensation for the
benefits received.
PetroKazakhstan views the abandonment by Lukoil of its prior commitments as yet
another example of the unreliability of Lukoil as a joint venture partner and
the failure by Lukoil to adhere to international business practices.
PetroKazakhstan Inc. is a vertically integrated, international energy company,
celebrating its eighth year of operations in the Republic of Kazakhstan. It is
engaged in the acquisition, exploration, development and production of oil and
gas, refining of oil and the sale of oil and refined products.
PetroKazakhstan shares trade in the United States on the New York Stock
Exchange, in Canada on The Toronto Stock Exchange, in the United Kingdom on the
London Stock Exchange and in Germany on the Frankfurt Exchange under the symbol
PKZ. As of December 27, 2004, PetroKazakhstan shares began trading on the
Kazakhstan exchange under the symbol CA_PKZ. The Company's website can be
accessed at http://www.petrokazakhstan.com/.
The Toronto Stock Exchange has neither approved nor disapproved
the information contained herein.
DATASOURCE: PetroKazakhstan Inc.
CONTACT: Ihor P. Wasylkiw, Vice President, Investor Relations,
(403) 221-8658, (403) 383-2234 (cell); Jeffrey D. Auld, Vice President,
Treasurer, + 44 (1753) 410-020, + 44 79-00-891-538 (cell)