Nostrum Awarded $150m Contract to Construct Gas Treatment Facility

Source: 7/28/2014, Location: Asia

Nostrum Oil & Gas plc, an independent oil and gas exploration and production company with assets in North-Western Kazakhstan, announces that the Group has entered into a contract with JSC “OGCC KazStroyService” (the “Contractor”) for the construction of the third unit of the Group’s gas treatment facility (“GTF”) for a consideration of US$150 million (the “Construction Contract”).

As the Contractor is an affiliate of KazStroyService Global B.V. (“KSS Global”), which currently owns approximately 26.6% of the Company’s ordinary shares, the Construction Contract is a related party transaction for the purposes of the Listing Rules. Accordingly, the Construction Contract is subject to the requirements of the Listing Rules and is conditional, inter alia, upon approval by the shareholders of the Company. As required by the Listing Rules, KSS Global has undertaken not to vote on the resolution to approve the Construction Contract at the general meeting of the Company’s shareholders to be convened in due course.

A further announcement regarding the posting of a circular to shareholders convening the necessary general meeting will be made in due course.

Commenting, Kai-Uwe Kessel, Chief Executive said:

“I am delighted that we continue to make good progress with the construction of GTU3. This Construction Contract forms a major part of the overall project. I believe we are now well positioned to deliver the plant on time and on budget. We look forward to working on the continued construction of GTU3 and doubling production by the end of 2016.”

Construction Contract details

Following the successful completion of the first phase of the GTF, consisting of two units, the Group proposed to build a third unit for the GTF (“GTU3”) by mid-2016. The construction of GTU3 is important for implementing the Group’s strategy to increase operating capacity and production of liquid hydrocarbons. Management estimates, based on the production profile of both proved and probable reserves reported in the 2013 Ryder Scott Report and assuming the successful completion of the second phase of the gas treatment facility by the middle of 2016, that the Company’s annual production will more than double by the end of 2016. Total construction costs for GTU3 are estimated to be not more than US$500 million.

Nostrum has appointed Ferrostaal Industrieanlagen GmbH, Kazakhstan Branch (“FIA”) and Rheinmetall International Engineering GmbH (a 50% subsidiary of Ferrostaal GmbH) as the project manager in charge of managing the engineering, procurement, construction and commissioning of GTU3 on behalf of Nostrum’s subsidiary Zhaikmunai LLP (“Zhaikmunai”). The Contractor was selected following a tender process carried out by FIA. Such choice reflected the Group’s determination of minimising the operational risks in building GTU3 and the financial and operating resources and relevant experience of the various bidders.

Payment of consideration

Total consideration to be paid under the Construction Contract is US$150 million cash (excluding VAT). Guarantee

KSS Global has agreed to guarantee the performance of the obligations of the Contractor under the Construction Contract.

For more information about related Opportunities and Key Players visit Caspian Region Projects

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