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Politics and Macroeconomics

PSA Offshore Oil Operations Draft Law Almost Ready

Kazakhstan is currently ready to submit the Offshore Operations Production Sharing Agreement draft law to parliament. Separate provisions of this draft law have been recently discussed in parliament.

After a recent parliamentary meeting, Daniyal Akhmetov instructed concerned ministries and departments to introduce all relevant comments made at the meeting into the draft law, and to submit the document to parliament,” read a press release.

According to the press release, Akhmetov indicated that the draft law complies “with modern standards” and takes into account “the changed reality in the oil and gas sector.” “Speaking regarding the clause in the document concerning the stability of contracts signed with investors, the PM underscored that this item is extremely important, in that it guarantees the observance of earlier achieved agreements,” the press release pointed out.

Last year, Kazakhstan passed a development program for the Kazakhstani sector of the Caspian Sea (KSCS). Under this program, throughout the country, Kazakhstan will extract 100 million tonnes p.a. by 2015 as part of KSCS from a total 150 million tonnes.

It is expected that companies operating in Kazakhstan will launch the development of Caspian shelf oil deposits during 2007-2008. Currently, Kazakhstan possesses onshore oil recovery abilities. Last year, oil and condensate extraction in Kazakhstan was about 52 million tonnes compared to 47 million tonnes in 2002. (Interfax-Kazakhstan)

Kazakhstan Reports 0.4% Inflation In August 2004

According to the national statistical agency, the Consumer Price Index (CPI) used in Kazakhstan as an inflation indicator amounted to only 0.4% in August 2004 versus 0.2% in July 2004.

According to the statisticians, food prices rose 0.1% in August, non-food prices increased by 0.8%, and fees for services increased by 0.5%. As a result, inflation was 3% for the first eight months of 2004, thus, food prices rose by 3.2%, non-food prices by 3.3% and services fees increased by 2.3%. According to the monetary and credit policy of the National Bank approved for 2004, the real average inflation for the year is forecasted to be within 5-7%. Meanwhile, the average index for basic inflation in 2004 is forecasted to be 4-6%.

Inflation in Kazakhstan in 2003 was 6.8%, compared to 6.6% in 2002. (Interfax-Kazakhstan)

Gross ForEx/Gold Holdings Increases 0.3% In August

The gross ForEx/gold holdings owned by the Kazakhstani National Bank totalled USD 6,678,000 for the end of August 2004, as compared to USD 6,658,000 for the end of July. Meanwhile, the national monetary base increased during this time to KZT 386 Billion from KZT 380.3 Billion, the bank’s press release indicated. This information was placed on the bank’s official website on Tuesday.

The money supply for the end of July 2004 totalled KZT 1,213.3 Billion, as compared to KZT 1,200.3 Billion for the end of July, and cash in circulation increased in July up to KZT 299 Billion from KZT 281.5 Billion for the end of June.

The ForEx/gold holdings of the National Bank and assets accumulated in the National Fund make up the entirety of the Kazakhstani ForEx/gold holdings. (Interfax-Kazakhstan)

Russian Ministry Of Finance Agrees On VAT

The Russian government instructed the Ministry of Finance to sign amendments to the agreement with Kazakhstan on the principles of levying VAT and excise taxes. According to the principles of the agreement, these taxes will be imposed in the country of destination when trading oil and gas.

Prime Minister Mikhail Fradkov issued the resolution on Tuesday, reported the press service of the Russian government. According to the document, the amendments state that both countries will start levying indirect taxes in the country of destination during oil and gas trading.

It was reported earlier that President Putin signed a law allowing Russia to levy indirect taxes in the country of destination when exporting oil and gas to CIS countries. The decision was made to promote the formation of a unified economic space including Russia, Ukraine, Kazakhstan, and Byelorussia. (Interfax)

Equities

The KASE-Shares index increased by 0.70% to 189.62 by the end of period on September 14 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 September 1 and September 7 2004, the volume of equity trades at the KASE increased to USD 15,560,855 from USD 9,949,757 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank TuranAlem (BTAS), Bank CenterCredit (CCBN), Narodniy Bank (HSBK), Kazakhmys (KZMS), Ordabasy (ORDB), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of Alyuminiy Kazakhstana (ALKZp), ATF Bank (ATFBp & ATFBp8), Bank Caspiyskiy (CSBNp), Narodniy Bank (HSBKp), Kazakhtelecom (KZTKp), Ordabasy (ORDBp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

Avery Worldwide Limited, an affiliate of the NC YUKOS, sold 22.5% of its shares in Ural Oil and Gas, which possesses a license for the Fedorovskiy oil and gas block in the West Kazakhstani Oblast, stated a MOL press release.

The US First International Oil Corp (FIOC) owns 22.5% of shares in the Fedorovskiy project. Avery Worldwide Limited, the project operator holds the remainder of shares. MOLF joined the consortium later, and must compensate project participants USD 9.45 Million. It is expected that some additional USD 18 Million will need to be invested into drilling 2 wells, in compliance with the company’s obligations as part of the current, second phase of geological exploration. (Interfax-Kazakhstan)

Banking and Finance

JSC Bank CenterCredit (BCC) has signed a credit agreement for over USD 12 Million for 12 a month period with Raiffeisen Zentralbank Osterreich AG (Austria), the BCC press service disclosed.

According to the press service, the principal goal of the loan is to finance grain export according to a client contract with the BCC. Within the first eight months of 2004 BCC has organized and attracted several loans on separate projects intended for financing import and export contracts for their clients, totalling USD 57 Million.

JSC Bank CenterCredit, one of the top 5 Kazakhstani banks, has a long-term Ba1 rating on foreign exchange bank deposits given by the rating agency Moody's Investors Service, and a B+ rating from Fitch Ratings. (Kazakhstan Today)

Metals and Mining

Ulba-China Co Ltd., a 100 % subsidiary of the Ulba Metallurgic Plant (UMP, Eastern Kazakhstan) has officially registered a branch in Shanghai. This information was placed on the official website of the national nuclear company, KazAtomProm, which is a 90% owner of UMP.

According to the web-site, the new enterprise will be designed to increase sales volumes of beryllium products in China and Southeast Asia, and will satisfy Chinese Southeast Asian demand for beryllium products, including beryllium alloys based on copper, aluminium, nickel, berlox products, beryllium bronze, etc.

It is planned for the new branch to provide the UMP with unobstructed access to potential beryllium markets and to promote its duly rendered services to potential partners in China and Southeast Asia.

UMP is the second largest manufacturer of beryllium products worldwide, and employs the full cycle of processing from ore concentrates to metal beryllium and its alloys. (Interfax-Kazakhstan)

***

Copper producer, the Kazakhmys Corporation produced 289,809 tonnes of refined copper from January to August of 2004, as opposed to 274,349 tonnes for the same period of last year, a press release distributed on Saturday read. The press release added that in August, the company produced 38,903 tonnes of refined copper.

In January to August of the current year, Kazakhmys produced commodity outputs worth KZT 112,631,109 Billion (exchange rate 135.83/USD 1), which is KZT 34,164,123 Billion higher than the same time last year.

Therefore, during the accounting period, they produced 23,665,557 tonnes of ore, failing to reach planned figures for eight months of 26,153,908 tonnes. During the corresponding period of 2003, they produced 27,603,480 tonnes of ore.

In January to August of the current year, Kazakhmys reduced zinc concentrate output, having produced 42,223 tonnes as opposed to 54,633 tonnes during these eight months of 2003, and 1,426.40 kg of gold bullion against 1,920.08 kg respectively, and silver granules – 353,018.96 kg compared to 397,653.85 kg. The press release added that in August of 2004, gold bullion output totalled 203,180 kg, silver granules – 50,050.2 kg. (Interfax-Kazakhstan)

***

The Kazakhstani gold extraction company, JSC Charaltyn, received KZT 250.561 Million in profit in the first half of this year compared to KZT 4 Million of last year.

The company report to KASE states that sales exceeded KZT 828.9 Million, which is 3.2 times greater than last year.

Company owned capital exceeded KZT 3.3 Billion by July 1, 2004, which doubled during the year.

The company’s assets grew from KZT 4.3 Billion to more than KZT 6.5 Billion this year. JSC Charaltyn was created in 1994 with a license to develop the Charaltyn Gold Belt, which exceeds 12 square kilometers in the East Kazakhstan belt territory. Confirmed reserves from all fields controlled by JSC Charaltyn totals 85 tonnes of gold. (Kazakhstan Today)

Energy and Power

The State Power Grid Company KEGOC utilized KZT 1.4 Billion from the total volume of capital investments in the first half of the year on a modernization project. In total, USD 92.4 Million of borrowed assets was spent since the implementation of the project in1999. Around USD 64.3 Million of this total was spent on a co-financing line from company funds.

Power transmission via KEGOC grids totalled 16.5 billion kW/h from January - June 2004, which is 1.3 times more compared to the same period in 2003 and 4% more than planned. The company’s press release indicated that the increase in the volume of transmission is mainly linked with export supplies of electrical power to Russia and with electrical power transit to neighbouring states. Moreover, according to the press release, the scope of services for a number of Kazakhstani industrial consumers increased during the reporting period.

The total length of electric mains for general use in Kazakhstan is: 1,400 km with 1,150 kW voltage capacity, over 5,500 km with 500 kW, over 20,200 km with 220 kW, about 44,500 km with 110 kW, over 62,000 km with 35 kW, about 204,000 km with 6-10 kW. (Interfax-Kazakhstan)

Transport and Telecommunications

The General Director of the Kiev aviation plant, Aviant, Oleg Shevchenko believes it feasible to create a united aviation-corporation for the CIS countries, provided that economically stable enterprises are included within the organization. “Economically unstable businesses could lead to the bankruptcy of the corporation”.

In the past, the General Director of Motor-Sich OJSC, Vyacheslav Boguslaev had spoken in favour of the rapid creation of an aviation-industrial corporation within the CIS at a meeting of the Ukrainian and Russian businessmen in the Crimea on July 26. At the same time, the Deputy Chairman of the Russian State Duma for CIS affairs and Compatriot Network, Alexander Lebedev, who supports the creation of a united aviation-industrial civil transportation corporation in Russia, spoke in favour of the creation of the Ukrainian-Russian aviation corporation. In his opinion, “nothing prevents us from creating a united aviation industrial corporation for the manufacture of airplanes, specifically, Tu-96, Tu-204, Tu-214, An-148 and An-70, with the support of the heads of the Ukraine and Russia, as early as September of this year”.

Recently, during negotiations in Moscow, the Ukraine and Russia agreed to resume mass production of modified versions of the An-124-100. The Ukraine’s share, according to some estimates, could be 30%. (Interfax-Kazakhstan)

***

BAE Systems Ltd. in response to information published in various mass media sources about the supposed sale of shares the company owns in Air Astana CJSC, confirms that the company does not have such plans, the company’s press-service reported.

As was reported earlier, a memorandum of understanding between Great Britain and Kazakhstan was signed in 2000. This agreement stipulated that BAE Systems Ltd. was to invest funds into the development of infrastructure for the air transportation system in Kazakhstan. In September of 2001, BAE Systems Ltd. and the Kazakhstani government signed a document for the creation of a JV, the airline, Air Astana CJSC. The shares of the JV were distributed as follows – 51% belong to the RK, and 49% of shares are owned by BAE Systems Ltd.

BAE Systems said, in particular, that the company is proud of its participation in Air Astana, which “demonstrates a high level of success, mostly due to the diligent work of the staff and the management”. (Kazakhstan Today)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 14 September 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: zhanar@maverick.kz

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