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Politics and Macroeconomics

Kazakhstan To Sell Of First Caspian Oil Blocks In 2004

Kazakhstan will hold the first tenders for rights to develop its abundant oil riches in the Caspian Sea by the end of this year, Deputy Energy Minister Baktykozha Izmukhambetov said on March 25.

Asked if the government was planning to hold the tenders sometime later this year, Izmukhambetov replied: “Yes. We expect this to happen then.”

Kazakhstan aspires to join the super-league of major oil producers by boosting crude output to over three million barrels per day by 2015.

The Caspian shelf, with its abundant oil reserves, is instrumental in achieving this goal.

Presenting an ambitious Caspian oil development program last year, Energy Minister Vladimir Shkolnik said the government had slated for sell-offs "dozens" of oil blocks on the shelf.

Kazakhstan's oil sector, despite growing investors' concerns over new high taxes to be levied on future Caspian shelf development, remains largely a success story and all Western oil majors are already in the country or plan to come and invest.

Shkolnik has said foreign direct investment in Kazakhstan's Caspian oil riches can amount to up to USD 30 billion by 2015. (RusEnergy)

Personnel Changes In Presidential Administration

Kazakhstani President Nursultan Nazarbaev last weekmade several major changes to the structure and composition of the Presidential Administration.

Mirbolat Zhakypov was named head of the General Secretariat of the PA, while Nellya Zhubasova was appointed head of the Domestic Politics Situation Center and the Socio-Political Department. Former PA press service head Esetzhan Kosubaev was named head of the Public Relations Department, while former presidential press secretary Zhanai Omarov was named head of the Information Analysis Center.

Serik Alkemtov will chair the PA Organization-Control Inspectorate and Personnel Policy Department, while the Personnel Policy Department head will be Ersultan Bekturganov and the Organization-Control Inspectorate will be led by Vladimir Kolomiytsev.

Marat Abulkhataev has been named head of Legal Protection Activities in the PA Governmental-Legal Department, while Talgat Donakov will head up the Legislation and Legal Review Department and Mukhamedzhan Pakirdinov – head of the Judicial Service Department.

In addition, Azamat Abdymomunov has been named head of the Systems Service, while Maksat Mukhanov will head up the PA Economic Policy Department Socio-Economic Analysis Center. The new PA Foreign Policy Department head will be Nurlan Ermekbaev. (Interfax)

Equities

The KASE-Shares index decreased by 1.74% to 173.12 by the end of period on April 7 2004. 

 KASE-Shares index and weekly volume of trades

Note: KASE-Shares index is based on ask prices for equities in A Listing

In the period between April 1 and April 7 2004, the volume of equity trades at the KASE decreased to USD 5,233,887 from USD 11,807,080 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank CenterCredit (CCBN), Kazakhmys (KZMS), Ordabasy (ORDB), Temirbank (TEBN), ValutTransit Bank (VTBN) and Zerde (ZERD) and preferred shares of Almaty Kus (ALKSp), KazChrome (KZCRp), Kazakhtelecom (KZTKp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

It is unlikely that the production sharing agreement for the development of the Kurmangazy offshore oil deposit will be concluded with Russia’s Rosneft under old tax laws, First Deputy Minister of Energy and Mineral Resources Baktykozha Izmukhambetov said.

Rosneft has voiced concerns that the Kurmangazy project will be unprofitable if it is subject to amended tax legislation that went into effect on January 1, 2004. The Russian company has demanded that Kazakhstan grant them the tax preferences available in the previous tax regime, the one they were operating under when talks on the project began in 2002.

 “This proposal is in the interests of Rosneft and Russia, but we have our own Tax Code,” Izmukhambetov told the Kazakhstani Parliament on April 1.

Izmukhambetov denied rumors that Rosneft will pull out of the Kurmangazy development project due to the new tax conditions in Kazakhstan. Negotiations with Rosneft are ongoing, he contended.

Kazakhstan and Russia agreed in principle to jointly develop the Kurmangazy deposit in the North Caspian Sea in 2002. Rosneft has a 50% stake in the project.

Kazakhstan is still in talks to sell half of its 50% interest in the project – or a 25% stake in the project as a whole – to French oil major Total SA, Izmukhambetov said. Under the proposed deal, Total would finance 50% of all expenses for geological surveys of the deposit, while Rosneft would finance the rest, absolving Kazakhstani state oil company KazMunayGas of any financial obligation to that stage of the project, while still retaining a 25% interest in the field.

KazMunayGas and the Kazakhstani government still believe a PSA for Kurmangazy will be signed with Rosneft (and presumably Total) by the end of 2004, Izmukhambetov said.

Kazakhstan estimates that the Kurmangazy field holds 0.9-1 billion tonnes of recoverable oil reserves. The field will cost about USD 10 Billion to develop, analysts say. (Interfax)

***

Kazakhstani President Nursultan Nazarbaev last week met with Wu Yaowen, the First Vice President of Chinese oil giant CNPC and the Chairman of the Board of Chinese-Kazakhstani oil production joint venture CNPC-AktobeMunayGas.

At the meeting with the president, Wu described to Nazarbaev the progress on a planned western Kazakhstan-western China oil pipeline. The Chinese are hopeful that the 3,000 mile pipeline will help satisfy rising domestic demand, while the Kazakhstani side see China as a promising and expanding market for its hydrocarbons. Initially the pipeline will have the capacity to pump 20 million tonnes of crude per year, but the throughput volume could be ramped up to 50 million tonnes per year, Wu said.

According to Wu, the design work has been finished on the Atasu-Alashankou section, the second of three planned legs of the pipeline. Officials from both countries have said that they hope to launch construction on that section this summer.

CNPC has invested over USD 1 Billion into AktobeMunayGas – operator of the Zhanazhol and Kenkiyak fields in Aktobe oblast – since it acquired a 60% interest in that project in 1997. It has since boosted its stake in AktobeMunayGas and bought a stake in Mangystau oblast’s North Buzachi project. (Kazakhstan Today)

***

Kazakhstan’s Deputy Minister of Energy and Mineral Resources Lyazzat Kiinov was on hand in Kyzylorda to launch a gas pipeline project at the Akshabulak gas deposit.

The Akshabulak deposit is being developed by Kazakhstani-German joint venture KazGerMunay. Kyzylorda oblast Akim Serikbay Nurgisaev was also on hand to take part in ceremony.

KazGerMunay Director Torsten Baars met with the dignitaries to outline the plans for the gas pipeline project. The JV is going to lay a 122-kilometer pipeline to link the field with oblast center Kyzylorda.

State-owned gas transport company KazTransGas (a unit of state oil and gas company KazMunayGas) will install an urban gasification system, while local company Syr Kuaty will use the gas to generate electricity at its plant. (KazInform)

Banking and Finance

Kazakhstani commercial CenterCredit Bank in 2003 posted a net profit of KZT 1.3 B, more than twice 2002 results.

The bank’s interest revenue increased by 1.4 times in 2003 to total KZT 7 B, mainly due to growth on its loan portfolio. The bank’s assets increased by 61% to total KZT 82 Billion. The CenterCredit loan portfolio comprised KZT 52 B, growing by 48% over the course of 2003. The bank’s equity capital increased by 74% to total KZT 10.8 Billion.

Bank CenterCredit is Kazakhstan’s fourth or fifth largest bank (depending on estimates), with 19 branches and 73 cash departments over the republic. CenterCredit has received a long-term foreign currency deposit rating of Ba2 from Moody’s Investors Service. (KazInform)

***

State-owned grain company GosProdKorporatsiya will see foreign bank loans to effect future grain purchasing, company First Vice President Abay Bisembaev announced at a press conference in Astana last week.

According to Bisembaev, in February 2004 GosProdKorporatsiya held a tender to solicit a USD 105 Million loan for future grain purchasing. Credit Suisse London won that tender. GosProdKorporatsiya could also seek a USD 30-40 Million from a Kazakhstani bank, Bisembaev added.

In light of the latter announcement, Bisembaev urged Kazakhstani banks to “think about lending conditions.”

 “While our banks propose 8-10% annual interest rates, western banks offer rates of just 5-7%,” Bisembaev explained.

GosProdKorporatsiya is expected to purchase two million tonnes of Kazakhstani wheat in the 2004 harvest. The state food company will also purchase stocks of corn, rice and sunflower.

GosProdKorporatsiya attracted a USD 85 Million loan to help finance grain purchases in 2003. It was the first non-government guaranteed loan to the agricultural sector in the CIS. (Kazakhstan Today)

Metals and Mining

Kazakhstani-Dutch joint venture Vasilkov Gold, the operator of the eponymous gold deposit in Akmola oblast, has launched the first phase of a land reclamation project to mitigate against the ill environmental effects of uranium processing at the Tselinniy Chemical Plant (currently owned by Kazakhstani-Israeli JSC KazSabton).

“Now we have started a pilot landfill, delivering several kinds of soils. With these pilot backfills, we have actually launched first phase of the drainage pond reclamation,” Vasilkov Deputy President Vladimir Danilov stated.

A feasibility study of the USD 8 Million environmental project is being prepared by Gold Service Company, the winner of a January 2004 tender.

According to its subsoil use contract signed with the government for 2003-2026, JV Vasilkov Gold is obligated to clean up 95-97% of the waste that has accumulated in retaining ponds due to the activities of the Tselinniy Plant.

JV Vasilkov Gold was founded pursuant to a governmental resolution in August 2000. Dutch company Floodgate Holding Billion.V. holds a 60% interest in the company, while the remaining 40% is owned by the State Property and Privatisation Committee of the Kazakhstani Finance Ministry. The Vasilkov deposit is estimated to hold 360 tonnes of gold. (Interfax)

Transport and Telecommunications

A special joint commission made up of governmentofficials and parliamentarians is going to be created in the near future to investigate the causes of the bankruptcy of former state airline Air Kazakhstan, Civil Aviation Committee Chairman Almatbek Mambetov announced. The Majilis, the lower house of Parliament, has urged the creation of the commission to determine whether the government – or elements in it – intentionally bankrupted the state airline.

Mambetov declined to discuss that issue, but he did note that some 2,000 of Air Kazakhstan’s 2,300 employees have already found new jobs, mostly with local airlines.

Air Kazakhstan suspended operations in February 2004. According to the Ministry of Transport, as of January 2004, Air Kazakhstan had racked up KZT 7.882 Billion in debts, including KZT 6.388 Billion owed to domestic entities and KZT 1.544 Billion to foreign entities. Air Kazakhstan had assets worth KZT 5.474 Billion. (Golden Eagle Partners)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 12 April 2004

Note: Some of the information quoted in this issue has been provided for us by Golden Eagle Partners. For more information on those articles, please contact: jmann1@AOL.com or newswire@ges.kz

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