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Politics and Macroeconomics

Capital Investments Grow In Ust-Kamenogorsk

A stable growth in capital investment has been observed in Ust-Kamenogorsk. Between January –June investment volume totalled KZT 6.86 Billion (43.2% of the investments in EKO). This is 15.4% more compared to the same period during 2003, the statistics municipal department reported.

The main part of the investment (60.6%) was spent for the purchase of equipment, instruments, and inventory, 37.1% was for construction and overall repair of buildings and structures. The main source of financing into fixed assets was the funds from plants and organizations, which amounted to 94.4% of the overall volume (during the corresponding period of 2003 – 91.7%). The share of assets from the local budget was 5.5 (7.8%), the republican budget – 0.1% (0.4%) respectively.

In the capital investments structure, some 65.3% was for the processing industry, 8.4% was for electrical power, gas and water distribution, 7.1% for real estate operations, 5.9% was allocated for transport and communications. (Kazakhstan Today)

External Debt Reduced By Over USD 47 Million

Kazakhstan’s external debt was reduced by more than USD 47 Million – down to USD 3 Billion during the first half of the year 2004, the Kazakhstani Ministry of Finance reported. The Director of the External Debt and Loans Department, Rustambek Ibraimov noted that such a tendency is natural. “We carry out a policy for the reduction of external loans in favour of the domestic market”. Since the beginning of the current year, the internal debt of the government has increased by USD 331.4 Million, which testifies to an increase in strength in the internal financial markets.

At the same time, guarantees for external debt increased by USD 7 Million. It totalled USD 565 Million as of July 1, 2004. The Ministry of Finance noted that a governmental guarantee is provided for loans taken by non-government enterprises. (www.kkb.kz) 

Kazakhstan Boosts Electric Energy Output By 4.5% In Six Months

The output and consumption of electric energy in Kazakhstan increased during the first six months of the current year, said Vladimir Shkolnik, Minister of Energy and Mineral Resources, at the extended government meeting in Astana. In addition, The Minister said that “the export of electric energy to Russia increased 1.5 times” during the same period.

At the same time, “in spite of all our efforts, Southern Kazakhstan will experience a shortage of energy during the winter of 400 billion kilowatt/hours”, V. Shkolnik explains. The Minister sees a way out of this situation by constructing several power plants.

V. Shkolnik thinks that the main task of his ministry is to “successfully get through the autumn-winter during maximum power consumption”.

According to yearly results in accordance with the calculations of the Ministry of Energy and Mineral resources, the growth in the electrical energy industry of Kazakhstan has to constitute no less than 6%. (Kazakhstan Today)

Nazarbaev – Fighting Inflation Is Our Common Task

Inflation in Kazakhstan for the first six months of 2004 increased by 6.6% compared with the same period of last year.

Nazarbaev recently said that inflation exceeded the level that was determined by Kazakhstani government and the National Bank for the current year considering the conditions of high world oil prices and significant inflow of foreign currency by 1.2%. N. Nazarbaev noted that the government and the National Bank have to develop a set of joint measures that will keep inflation within 4-7%.

Strengthening the national currency should be considered another macro-economic problem at the present moment. “For the first six months of the year, the tenge rate in relation to the entire currency basket experienced real strengthening by 5.8%. The National Bank has always been subject to criticism for its dollarization policy, now de-dollarization is taking place. National consumers are increasing their preference for tenge over dollars”, said N. Nazarbaev.

The President ordered the government and the national Bank to expedite the development of the concept of the national fund and to clarify a strategy for managing Kazakhstani external assets that have already exceeded USD 10.5 Billion. (KazInform)

Equities

The KASE-Shares index decreased by 0.24% to 195.72 by the end of period on August 03 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 July 28 and August 3 2004, the volume of equity trades at the KASE decreased to USD 16,416,726 from USD 19,275, 980 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank TuranAlem (BTAS), Bank CenterCredit (CCBN), Bank Caspiyskiy (CSBN), Kazakhmys (KZMS), Ordabasy (ORDB), Rakhat (RAHT), Temirbank (TEBN), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of Almaty Kus (ALKSp), Alyuminiy Kazakhstana (ALKZp), ATF Bank (ATFBp), Bank Caspiyskiy (CSBNp),  Narodniy Bank (HSBNp), UKTMK (UTMKp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

AO PetroKazakhstan Kumkol Resources, the production division of PetroKazakhstan Inc., in conjunction with the akimat of Kyzylorda, has established the Demeu Social Fund. The Demeu Social Fund is intended to act as a non-profit focal point for funding socially significant and useful projects through combining funds provided by oil and gas companies operating in the Oblast. Joining AO PetroKazakhstan Kumkol Resources as a founder of the Demeu Social Fund is Turgai Petroleum, AO PetroKazakhstan Kumkol Resources’ joint venture partner

The Demeu Social Fund is the product of a meeting held between the President of AO PetroKazakhstan Kumkol Resources, Thomas P. Dvorzhak, and the Akim of the Kyzylorda Oblast, Mr. I. A. Adyrbekov, where various social issues affecting the people of the Oblast were discussed. During this meeting, which was held in early June, it was agreed that a central fund that ‘pooled’ monies being dispersed to the community by oil and gas companies would better address the social infrastructure needs of the Kyzylorda Oblast. The Demeu Social Fund will have a committee consisting of individuals from contributor companies and a representative from the Oblast Akimat in order to identify projects for funding. AO PetroKazakhstan Kumkol Resources has committed a lump sum contribution of USD 725,000 as its initial contribution to the Fund for the balance of this year. This amount is in addition to $600,000 USD already provided so far by AO PetroKazakhstan Kumkol Resources for projects and community based initiatives in the Kyzylorda Oblast for 2004, and the USD 12 Million to the city gasification project. Approximately USD 5 Million has already been provided for the construction of this socially significant project

PetroKazakhstan Inc. is a vertically integrated, international energy company, celebrating its seventh year of operation in the Republic of Kazakhstan. It is engaged in the acquisition, exploration, development and production of oil and gas, oil refining and the sale of oil and refined products

PetroKazakhstan trades shares in the United States on the New York Stock Exchange, in Canada on the Toronto Stock Exchange, in the United Kingdom on the London Stock Exchange and in Germany on the Frankfurt exchange under the symbol PKZ. The company’s website can be accessed at www.petrokazakhstan.com, JSC PetroKazakhstan Kumkol press release reads. (Golden Eagle Partners)

***

Progress on the preparation of the construction of the Atasu (Kazakhstan)-Alashankou (West China) oil pipeline and other issues pertaining to the commencement of the project were covered on Thursday during a session of the Kazakhstani government with the participation of the Prime Minister Daniyal Akhmetov.

At present, Kazakhstan is carrying out negotiations with China on the main principles and conditions of financing, and has signed constituent documents on the Kazakhstani –Chinese pipeline creation JV, and has defined a budget as well as a staff schedule. Creditor banks have been preliminarily determined.

It was decided that the construction of the main line, possessing a 977.5 km length and 10 million ton carrying capacity per year would be launched in 2004 and finished in 2005. (Kazakhstan Today)

***

On the basis of CJSC Research and Design, the Oil and Gas Institute (NIPInefteGas) hosted an official presentation of a modern laboratory for issuing European standard oil quality certificates.

According to NIPIneftegas representatives, in June the laboratory gained international accreditation for the ISO 7025 quality system. As part of the project, “Support to oil and gas production and transportation sectors”, the laboratory is equipped with modern equipment, enabling it to analyse crude oil using 18 chief parameters. For three years, the project budget was nearly EURO 2 Million.

According to the Regional Coordinator on European Alliance Assistance, opening of a laboratory based on European norms is a part of the general policy of the European Alliance.

He also noted that “until the present, no one Kazakhstani laboratory worked with European standards”. (Kazakhstan Today)

***

The Economic court of Aktobe Oblast in western Kazakhstan has placed a ban on the operation of 14 wells at the Zhanazhol and Kenkiyak deposits, which are under the development of CNPC - AktobeMunayGas (an affiliated structure of the Chinese National Petroleum Corporation, CNPC), after the company admitted to a number of infringements of environmental protection legislation.

As was reported on May 2004, the court also banned CNPC-AktobeMunayGas from using the illegally constructed 30-km Kenkiyak - Zhanashol pipeline until a corresponding decision from appropriate authorities.

As is well known, in 1997 CNPC bought 60.2% of AktobeMunayGas and the company was renamed CNPC - AktobeMunayGas. In late May 2003, Kazakhstan sold its 25.12% stake to the Chinese partners.

CNPC - AktobeMunayGas is the largest oil producing company in the Aktobe oblast. As of the end of 2003, recoverable reserves at the Zhanazhol deposit totalled more than 78 million tonnes. In addition, other deposits developed by the company, the Kenkiyak persalt and Kenkiyak subsalt contained about 17.2 million tonnes and 28.3 million tonnes of crude hydrocarbons, respectively.

In 2003, the company extracted 4,650 million tonnes of oil, and in the current year it hopes to extract 5.5 million tonnes and in 2005 the company plans to produce up to 7 million tonnes of oil. (Interfax-Kazakhstan)

***

The Canadian oil company, PetroKazakhstan Inc. decreased oil exports by 3% and increased refining by 2.6% in April-June 2004 compared to the corresponding period in 2003.

"The volume of oil exported for the second quarter 2004 totaled 6.99 million barrels (902,300 tonnes), which is approximately a 3% decrease in comparison with the second quarter 2003, and 11% less than Q1, 2004", a company press release read on Friday.

The document read that the reduction "was a result of operational problems with the Atasu terminal (in the Karaganda oblast, central Kazakhstan) and the oil pipeline from mid February to mid May 2004" as well as lower export quotas on the part of the Energy and Mineral Resources of Kazakhstan.

Shipment volume from the Jusaly oil-loading terminal (in the Kyzylorda oblast in the south), increased by 78% compared to the second quarter of 2004 and by 70% compared to the first quarter. The Jusaly terminal was launched at the end of Q2, 2003 and in Q1, 2003 it operated less than 1% of shipments.

Moreover, the message read that in the reporting period "the volume of oil shipments to China totalled 83% of the deliveries in Q1, 2004 and 74% of Q1, 2003".

"These results also point to operational problems concerning the terminal Atasu and the oil pipeline, as well as export quotas", the press release read.

In addition, deliveries by the CPC grew by 5% compared to Q1, 2004. CPC deliveries started in September 2003. The company has not provided precise figures.

Moreover, according to the release, refining at the Shymkent refinery totalled 7.7 million barrels in Q1, 2004 compared to 7.5 million barrels during April-June 2003 (7.1 million barrels in Q1, 2004).

According to the information provided by the press-service, in the second quarter five exploitation wells were drilled at Kyzylkiya deposit and the adjoining license territory Kolzhan located to the north from Kyzylkiya. Therefore, 9 wells were drilled so far for 2004. Another 4 exploitation wells are planned in 2004.

The release also read that the well drilling program at Aryskum started from drilling 3 wells in Q2, 2004. In the H2, 2004 another 13 wells will be drilled and one of them – a horizontal well should increase extraction and provide for a more full development of the reserves.

It is expected that development and extraction at the Eastern Kumkol deposit will be renewed in Q3, 2004 provided that the company receives permission from the regulatory agencies.

Until the years end, the company plans to drill two assessment wells at the Northern Nuraly deposit and at lest two wells in the southern part of Zhamansu.

PetroKazakhstan, HQ-ed in Canada is an integrated international energy company that has been working in Kazakhstan for seven years. It is involved in oil exploration, production, and export, and the refinement and sale of petroleum products. The company is developing the Kumkol fields in southern Kazakhstan and owns one of the country's three oil refineries – Shymkent refinery (in the south). (Interfax-Kazakhstan)

***

The National oil and gas operator KazMunayGas (KMG) plans to obtain a total net profit of KZT 128.8 Billion (current exchange rate KZT 135.91/USD1) during 2004-2005. “The total revenues of KMG for the period from 2004 to 2006 were planned to be KZT 1 trillion 215.7 Billion, and the total net income – KZT 128.8 B”, - a recent press-release by the KMG PR department read.

Earlier, the Kazakhstani government approved a development plan for a three-year period, pursuant to which the total amount of investment into fixed capital at the expense of all sources of funding for 2004-2006 was KZT 328.2 Billion, and KMG’s consolidated assets, as expected, will reach KZT 1 trillion 385 Billion by the end of 2006.

KMG is a vertically integrated oil and gas company, consisting of 45 diversified structures and enterprises, implementing a full cycle of projects and services for exploration, production, processing, transportation and sale of raw hydrocarbon products and the construction of industrial oil facilities, telecommunications and transport.

Oil and gas output by KMG enterprises in 2003 totalled 7.9 million tonnes, which is by 6.5% more than the level of 2002. In 2003 KMG plans to boost oil and gas output up to 8.3 million tonnes. (Interfax-Kazakhstan)

***

“All of the disputed, unsettled questions concerning the Northern Caspian project – the Kashagan project – are over. Everything is proceeding according to the working program,” the Minister of Energy and Mineral Resources, Vladimir Shkolnik announced recently speaking at the expanded session of the government with the participation of the President, Nursultan Nazarbaev.

It is well known that about one month ago, the Mangistau district court (in the West) confiscated a floating drilling platform, the Sunkar, in lieu of debt. The platform belongs to an American company, Parker Drilling, which is a contractor of the international consortium Agip KCO that is engaged in Kashagan operations.

At this time, the Sunkar platform remains in Bautino, a Caspian port in the Mangistau oblast, and all corresponding oil prospect operations have been suspended.

According to statements provided by the Kazakhstan side, the requisition of the platform will remain in force until Parker Drilling pays KZT 812 Million tenge (the current exchange rate is KZT136.29 / USD 1) to the republic for infringement of customs legislation.

Partners of Agip KCO are ENI, ExxonMobil, Shell and TotalFinaElf, each with a 16.67% shared interest, and ConocoPhillips and INPEX, each with 8.33%. BG has announced its withdrawal from the project and the other participants will buy its 16.67% share. However, the Kazakhstani government has announced its plans to acquire the shares at market value in June. The BG shares are valued at USD1.23 Billion.

The consortium was set up following the signing of a PSA for 40 years in 1997. The consortium plans to start industrial production in 2007-2008.

According to an announcement by Agip KCO, recoverable reserves in Kashagan are estimated at 7 billion - 9 billion barrels, with total geological oil reserves of 38 Billion barrels. (Interfax-Kazakhstan)

***

In answering a corresponding question, the Kazakhstani Premier, Daniyal Akhmetov told the press service on Monday in Almaty that Kazakhstan expects to determine its position in the construction of the Karachaganak gas refinery by late 2004.

 “I think that by the end of this year, probably during the Prime Minister of Russia Mr. Mikhail Fradkov’s visit to our country, we shall achieve a positive result from the gas project,” Akhmetov said.

Akhmetov pointed out that Kazakhstan would take into account the interests of Russia in designing this project. He indicated however, that the initial position being taken is that gas shall be processed on territory of Kazakhstan.

The gas refinery, which is to be constructed in Western Kazakhstan, shall process about 10 billion cubic meters of gas annually according to one of the variants of the project. “Gas delivery, in a volume of 7 billion cubic meters, to the Orenburg gas refinery shall not decrease. Therefore, we will consider other offers suggested by the Russian government concerning the expansion of the Orenburg gas refinery with the participation of Kazakhstan,” Akhmetov said. He continued by saying, “it is possible from an economic point of view, but provided that Kazakhstan has a precise interest in corresponding products and will have an opportunity for sale overseas.”

At the moment, the Kazakhstani party is studying both variants of the project very closely, the premier said.

The gas project includes the construction of a gas refinery with an initial annual capacity of 10 billion cubic meters for processing Karachaganak gas and construction of an export pipeline to transport commodity gas.

The Karachaganak deposit is one of the world's largest with reserves of more than 1.2 billion tonnes of liquid hydrocarbons and 1.3 trillion cubic meters of gas.

Karachaganak Petroleum Operating is a joint company between ENI, BG (32.5% - each), ChevronTexaco (20%) and LUKOIL (15%), and develops the deposit according to the PSA with Kazakhstan. (Interfax – Kazakhstan)

Banking and Finance

BankCenterCredit OJSC (BCC) plans to actively develop a mortgage lending program, and by the end of 2004 it will increase its total size by two times, the bank’s press-service reported.

The bank began providing loans through the JSC Kazakhstani Mortgage Company (KMC) in 2003. During its cooperation with the KMC, the bank provided loans to a total amount of over KZT 9.5 Billion, or more than 50% of all loans being taken.

The BCC mortgage lending program operates in all of the bank’s 19 branches. Every week, KZT 200 Million is lent in Kazakhstan in the form of mortgage loans. With the help of loans from BCC, more than 7000 Kazakhstani families were able to buy a house.

The BCC cooperates with major construction companies for housing construction and is included in the list of the 5 best banks in Kazakhstan in terms of growth. As of July 1, the total amount of loans disbursed to individuals increased by 36% compared with the corresponding period of last year and totalled more than KZT 17 Billion. (Kazakhstan Today)

***

The Director of the National Bank of Kazakhstan, Anvar Saidenov stated on Wednesday that the Kazakhstan National Bank began issuing a new quarterly edition the Inflation Review. This edition will contain information about the macroeconomic situation, under conditions of which monetary policy is carried out, on price dynamics, as well as inflation forecasts.

It is intended that the new edition will be of interest not only for specialists, but also for the wider public on issues of monetary policy. “We believe that this edition signifies a noteworthy event for the National Bank and the entire financial sector”, A. Saidenov said.

The Inflation Review differs from the existing National Bank editions in the fact that it will present complex analysis of monetary policy, the necessity of taking particular regulatory measures and the control of inflation. A. Saidenov reported that a pilot project based on results of 2004 has already been prepared. Work on the edition for the second quarter is also almost completed. In the near future, an electronic version of the edition will appear on the site of the National Bank of Kazakhstan.

For the time being, the Inflation Review will be issued only in Russian, and in the future it will also be offered in Kazakh and English. (Kazakhstan Today)

Metals and Mining

The joint Russian-Kazakhstani company, RosKazMed intends to put an ore-mining and processing plant in operation at one of the largest copper-pyrites deposits known as the “50th Anniversary of October” site during Q3 of 2005. The capacity of the plant would be more than 3 million tonnes of copper ore per year.

The Copper group company's press service said that total investments in the plant's construction, including design costs, expenses for development of the mine and construction of the enrichment plant will total over USD 100 Million.

The founders of RosKazMed are the CJSC Kyshtym copper-electrolytes plant (Chelyabinsk oblast, part of the Copper Group Company) and the Kazakhmys corporation (Kazakhstan).

According to the press service, during the middle of July 2004, Kazgiprotsvetmet (Kazakhstan), Polymetal (St. Peterburg) and Outokumpu Technology Oy (Finland) finished design work at the 50th anniversary of October deposit.

In the beginning of 2004, the Copper Group signed a contract with Finnish Outokumpu Technology Oy for the development of the project and the construction of the plant. In July, the Copper group signed a contract with Caterpillar on the delivery of mining equipment.

The 50th anniversary of October Copper-pyrites deposit is part of the group of Mid-Orsk deposits and has considerable explored reserves – approximately 900,000 tonnes of copper, 200,000 tonnes of zinc, 14,000 tonnes of cobalt and 160 tonnes of silver.

Ores are concentrated in three deposits, Severnoe (one ore body), Central (three ore bodies) and Yuzhny (two ore bodies). The largest is Yuzhny – 98.7% of total reserves of the deposit. Average copper content is 1.83%, zinc – 0.51%, sulphur – 37.1%, cobalt – 0.031%, silver – 3.9 g/ton, selenium – 73 g/ton.

The owners of the Copper group are Igor Altushkin and Alexander Volkhin. The group includes the Kyshtym copper-electrolytes plant, the Novgorod metallurgy plant and the Ormet plant. At the moment, the Copper group has 15% of the Russian copper market. (Interfax)

***

Net profit for KazZinc JSC in January - March 2004 totalled KZT 7.548 Billion against KZT 5.228 Billion for the same period of last year.

This information is contained in company financial statements delivered to KASE.

According to the report, sales volume in January - March 2004 totalled KZT 22.043 Billion versus KZT16.025 Billion in January - March 2003, thus the cost of sales stood at KZT 9.984 Billion and KZT 8.317 Billion, respectively.

The equity capital of KazZinc as of April 1, 2004 totalled KZT 56.796 Billion compared to KZT 41.826 Billion for the corresponding period of last year; its authorized capital stock was KZT 20.644 Billion and KZT 18.863 Billion respectively.

Company assets as of the specified date reached KZT 112.971 Billion from KZT 98.835 Billion one year ago, liabilities, on the contrary, decreased to KZT 56.147 Billion from KZT 57.009 Billion accordingly.

KazZinc is a large integrated manufacturer of zinc with large share of accompanying copper, precious metals and lead output.

KazZinc has not opened the structure of its shareholders, saying only that the general investor for the company is Glencore International A.G.

Last year, KazZinc produced 276,790 tonnes of zinc against 266,886 tonnes in 2002. (Interfax-Kazakhstan)

Energy and Power

Net profit for the Kazakhstani National Electricity Grid Operator KEGOC JSC totalled in January-June of 2004 KZT 879 Million (current rate KZT 136.29/USD1) compared to KZT 1.8 Billion in the first six months of 2003, KEGOC press-service reported.

The reduction is “connected with a growth of expenses for compensation of power losses in view of the growth of transmission volume, for depreciation deductions as part of the investment program, and for training and consulting services for upgrading the power system and for the payment of interest and compensation on the borrowed funds”.

In addition, it is connected with a reduction in tariffs as a result of changes to the Kazakhstan Tax Code. In the meantime, during the first half of 2004 the company gained revenue from its chief operations in the amount of KZT 8.1 Billion, which are 5.7% greater than during the same period of 2003 and 1.8% higher than the planned figure.

In the first six months, the company utilized KZT 2.2 Billion of capital investments, which is 42.2% more compared with the same period of last year, and by 11.1% more than the level planned.

The government owns 100% of KEGOC’s shares. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week