Kazakhstan fines subsidiary of British Nostrum Oil for tax evasion

The Zhaikmunai oil and gas company, a subsidiary of Nostrum Oil & Gas Plc, paid $18.8 million in corporate income tax and value-added tax and $4 million in fines for violations in tax-paying committed over the past few years, the prosecutor’s office of the West Kazakhstan region reported.

«After intervention by the regional prosecutor’s office, the Zhaikmunai oil and gas company has paid $18.8 million of corporate income tax and VAT. Moreover, for wrong calculation of these taxes over the period from 2016 to 2021, the company was fined $4 million in accordance with Paragraph 1, Article 278 of the Administrative Offences Code,» the agency said in a statement.

As a result, the country’s budget received $23 million. In 2013, Zhaikmunai paid $3.6 million in fines for burning 30.9 million cubic meters of associated gas without permission. Even though the company paid the fine, it insisted that the claim of the Ministry of Industry and New Technologies (currently the Ministry of Industry and Construction) was groundless.

In early September, Nostrum Oil announced the successful restart of the third gas treatment unit (GTU-3) with a capacity of 2.5 billion cubic meters of gas per year. The project cost $750 million and began operations in 2019. In 2023, the company completed the upgrade of the unit’s systems and other maintenance work. The GTU allows the company to collect and process natural gas and gas condensate. At its gas treatment facility, Nostrum purifies, dries and cools the natural gas.

According to Chief Executive Officer of Nostrum Oil & Gas Arfan Khan, the successful restart of GTU-3 shows the high qualification, dedication and coordinated work of the company’s engineering and operational services specialists.

«This is an important milestone for Nostrum, demonstrating the operational efficiency of our gas treatment infrastructure in Northwest Kazakhstan with a combined capacity of 4.2 billion cubic meters per year, as well as our readiness to start processing natural gas from third parties apart from gas by Ural Oil and Gas LLP that is expected to start its commodity supplies in Q4 of this year,» he said.

Earlier this year, Nostrum Oil reported that its revenue over the first six months of this year declined by more than half and reached $52.8 million. This happened against the background of a decrease in oil output and a plunge in oil prices. The company also reported EBITDA at $15.5 million compared to $68.8 million over the same period last year.

As of June 30, the company’s unrestricted cash balance was $192 million ($191 million as of March 31). On the other hand, restricted cash decreased from $22.6 million in March to $16.3 million in Q2 due to $6.2 million of interest paid from February 9 to June 29. The next semi-annual coupon payment is scheduled for December 2023.

Over the first six months of this year, the company reported a daily output of 10,048 barrels of oil equivalent (BOE) on average (14,167 over the same period last year). According to the company, its average daily sales volumes in the first half of this year amounted to 9,020 BOE (13,102 BOE last year).

Among the major shareholders of Nostrum Oil are U.K.-registered ICU Holdings Limited, EMOV Caspin Holdings Limited and Amundi. Nostrum Oil is also registered in the U.K. but conducts its oil and gas exploration and production activities solely in Kazakhstan. The company’s shares are listed on the London Stock Exchange and the Astana International Financial Center Exchange (ticker: NOG). The company’s key producing asset is the Chinarevskoye field, operated by Zhaikmunai. The company owns 100% of the rights to use the subsoil in this field.