Azerbaijan Taxing Lukoil on Sale of ACG Stake

The Government of Azerbaijan is now insisting that Lukoil pay $250 million in taxes on the sale of its 10% Azeri-Chirag-Gunashli stake to Inpex. Last week Lukoil completed the sale of its stake to Inpex for $1.354 billion after agreeing to pay SOCAR additional monies for the Yalama project in lieu of paying taxes.

However, Tax Minister Fazil Mamedov said he wanted an international auditor to decide whether Lukoil had the right not to pay taxes after selling the stake. "Tax issues with Lukoil have not been solved. Lukoil's additional payments for Yalama do not go to the Azeri budget and we still want to get profit tax from the Lukoil-Inpex transaction, which the law sets at 25 percent," Mamedov said. "It will be a big success if we manage to solve the problem before the end of 2003."

A Lukoil official in Baku said the Azeri request for profit tax on the transaction was against the terms of the production sharing contract which the state signed in 1994 with the BP-led consortium.

The ACG project will become a major source of crude for a planned $2.9 billion Baku-Ceyhan pipeline from Azerbaijan to Turkey after 2005.

Other partners in the project are BP, ExxonMobil, SOCAR, Statoil, Unocal, TPAO and Itochu.