Central Asia Petroleum Negotiating Sale of MangistauMunaiGas

The Indonesian company Central Asia Petroleum Ltd., majority owner of AO Mangistaumunaigas (MMG), has decided to sell a majority stake in the Kazakh oil company. According to sources, negotiations with several foreign companies have already begun. It is already known that the Kazakh national oil company KazMunaiGas (KMG) plans to acquire at least 25 percent of the company, probably not later than in the first half of 2008.

According to sources in the company, Central Asia Petroleum Ltd. intends to price the whole company at $4.3 billion. At the end of 2006, when the management of the company attempted to delist its shares from the Kazakhstan Stock Exchange (KASE) to prevent a supposed hostile takeover, analysts estimated the value of the company at $4 billion. Even though at that time, despite circulating rumors, no transaction took place, interest in MMG did not abate. “Chinese, American and Russian companies have shown interest in acquiring a controlling stake in the company”, said a source in the Ministry of Energy and Natural Resources. “Lukoil has been actively interested. Furthermore, the Indian concern Mittal Steel which has recently acquired significant interests in oil and gas and power generation is often mentioned as an interested party”, noted Dmitriy Aleksandrov, an analyst at the Russian brokerage Financial Bridge in an interview with Kazakh business weekly Business & Power. According to the analyst, though, the structure of the company is extremely opaque, and it is very difficult to accurately estimate its value. “Based on the company’s oil production, the price tag could range from $3 to $4.5 billion,” thinks Aleksandrov. “I assume that the 25 percent stake that KMG is expected to acquire will be priced closer to the upper range”. In his opinion, the remaining shares could be acquired by a strategic foreign investor like Lukoil, Mittal Steel or Chinese CNPC. “The participation of American investors appears less likely”, believes the analyst.

“The majority of shares in the company will be sold after KazMunaiGaz acquires the blocking stake in MangistauMunaiGas. That transaction must take place in the beginning of 2008 “, reported a source in the Ministry of Energy and Mineral Resources. The blocking stake in the company is necessary to enable KMG to exercise control over who will be allowed to acquire the remaining shares in the company. “As soon as the 25 percent are ‘returned’ to the state, no decision will be made without the participation of the national oil company. Indeed, besides its oil and gas interests, MMG owns 55 percent of the Pavlodar petrochemical plant. And much will depend on who controls the refinery, among other, possibly, the prices of gasoline. For Kazakhstan, this is a strategic asset”, he emphasized. “Most likely, the Pavlodar refinery will be sold separately from the oil and gas assets that MMG controls. But this is still a question of negotiation.”

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