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Politics and Macroeconomics

9% Economic Growth In 2004 Says IMF

Kazakhstan's economic growth will reach 9% in 2004. This forecast is part of the review on the World Economic Outlook distributed by the International Monetary Fund (IMF). The April IMF review for the prospects of the world economy read that the growth of the Russian economy in 2004 will constitute 6% compared with 7.3% in 2003 and 4.7% in 2002. On average, according to the new IMF forecast, economic growth in the CIS will amount to 8% in 2004, compared to 7.6% in 2003 and 6.6% in 2005. Russia will lag behind Kazakhstan, the Ukraine (12.5%), Azerbaijan (9.1%), Georgia (8.5%) and Tajikistan (10%). (Interfax)

Draft PSA Submitted To Parliament

The Kazakhstani government has recently submitted a draft of the production sharing agreements law for offshore oil operations. "A document will be considered during the next session of the chamber's bureau that would define the head committee for the draft", the chamber's press service said on Thursday. According to an announcement by the government, the Production Sharing Agreement is a type of contract for offshore operations or the combined offshore exploration and extraction of hydrocarbon crude. According to the existing PSA law, Kazakhstan "grants the right for the combined exploration and extraction or for the extraction of hydrocarbon crude and related work at offshore locations as stated in the terms of the tender". The Energy and Mineral Resources Minister, Vladimir Shkolnik has been instructed to report on the draft to the Majilis. In 2003, Kazakhstan adopted a national development program for hydrocarbon resources of the Caspian shelf, valid until 2015. It is planned that by 2015, oil extraction at the Caspian shelf would total not less than 100 Million tonnes out of 150 Million tonnes planned for production. It is expected that the companies working at the Caspian shelf would begin production no earlier than 2007-2008. At the moment, oil is chiefly being produced on land. Las year, about 52 Million tonnes of oil and condensate were extracted, compared to 47 Million tonnes in 2002. (Interfax-Kazakhstan)

Equities

The KASE-Shares index increased by 1.34% to 203.08 by the end of period on October 5 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 29 and October 5 2004, the volume of equity trades at the KASE increased to USD 14,630,098 from USD 8,914,813 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank TuranAlem (BTAS), Bank Caspiyskiy  (CSBN), Narodniy Bank (HSBK), Kazakhmys (KZMS), Kazakhtelecom (KZTK), KazZinc (KZZN), Ordabasy (ORDB), Rosa (ROSA), Temirbank (TEBN), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of Alyuminiy Kazakhstana (ALKZp), ATF Bank (ATFBp), Bank Caspiyskiy  (CSBNp), Kazakhtelecom (KZTKp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

Uzakbay Karabalin, the head of the national oil and gas company KazMunayGas, has confirmed claims made by Kazakhstan’s tax authorities against the joint venture TengizChevroil (TCO), which is developing the Tengiz oil and gas deposit in western Kazakhstan.

Recently, a number of media outlets had distributed information referring to sources in LUKoil, stating the size of tax claims against TCO as USD 2.5 Billion. “TCO has problems with the tax committee. At the moment, these issues are still being considered and I cannot say anything for sure until they are resolved”, commented Mr. Karabalin at a news conference.

TCO’s General Director Alexander Cornelius said, “I do not know what the shareholders are talking about. We did not receive any notices from the tax authorities regarding fines”. Grigoriy Volchek, the press secretary of LUKoil Overseas, an affiliate of LUKoil, also denied the claims. “LUKoil would like to strongly deny information appearing in a number of mass media outlets on alleged huge tax claims initiated by the Kazakhstani state authorities against the JV TengizChevroil. This is a bubble and I hope it has already burst”, Mr. Volchek said.

TCO is the largest oil producer in the republic, recovering almost 25% of all oil extracted in Kazakhstan. This year, TCO intends to extract 13 Million tonnes. TCO started extracting oil from Tengiz in 1994 based on a 50/50 agreement signed between Chevron and Kazakhstan in 1993.

TengizChevroil shareholders include ChevronTexaco Overseas with a 50% share, ExxonMobil with 25%, the government of Kazakhstan via KazMunayGas at 20% and the Russian-US joint venture, LUKarco with a 5% share.

In 2003, 45,309,600 tonnes of crude oil and 6,080,000 tonnes of condensate were produced in Kazakhstan, according to information from the National Statistical Agency. (Interfax-Kazakhstan)

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Research in the gas sector of Kazakhstan conducted by the Ministry of Energy and Mineral Resources, KazMunayGas and ExxonMobil showed a high feasibility for exporting gas to markets in Western Europe, the Minister of Energy and Mineral Resources Vladimir Shkolnik reported at a news conference in Almaty on Tuesday. He said, “The research showed that it is profitable for Kazakhstan to supply gas to those markets, first of all to Western Europe”.

He continued by saying that at the moment, Kazakhstan is considering the possibility of supplying gas to South-East Asia, in particular, China under a swap agreement. The minister gave a positive answer when asked whether Kazakhstan plans to construct new export gas pipelines.

“We are now carrying out related calculations on the issue”, he said. The minister also mentioned that the research considered the development of petrochemical facilities near gas deposits in western Kazakhstan, where oil and gas is abundant, and in the south, specifically at the Shymkent tire plant.

The study was performed at the request of the government of the Republic of Kazakhstan and lasted for one year. (Interfax-Kazakhstan)

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On October 6, JSC NC KazMunayGas Managing Director of PSA Projects, Askar Balzhanov, and ENI Deputy Executive Director of Kazakhstani Operations, (an Agip KCO subdivision), Pietro Cavanna signed a Memorandum of Understanding during the international exhibition KIOGE 2004, currently being held in Almaty. The memo outlines the chief principles for mutually beneficial cooperation between the two companies in the creation of coastal infrastructure facilities for offshore oil operations at Kazakhstan’s sector of the Caspian Sea.

Under the parameters outlined by the memo, an affiliate company of KazMunayGas, the LLP TenizService will finance and construct a fuel station for sea vessels. It will also build facilities for waste utilization (in the area of the Tub-Karagan gulf in the Mangystau Oblast) and a north Caspian oil spill response base (Atyrau Oblast), and render services for Agip KCO.

According to TenizService General Director, Nurlan Sauranbaev, “investments into these projects will total in the millions of dollars, and the terms for execution for each project will be from 1 to 3 years”. He said that construction is expected to begin in early 2005. Tender procedures should take place by the end of 2004. (Kazakhstan Today)

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Astana and Baku will soon hold the further round of talks on Kazakhstan joining the oil-transportation project, Baku-Tbilisi-Ceyhan (BTC).

“We will hold the next round during this year”, the Kazakhstani Energy and Mineral Resources Minister, Vladimir Shkolnik said in Almaty on Tuesday at the press conference for the opening of 12th Kazakhstani international oil and gas exhibition, KIOGE-2004.

“Our oil is necessary for this project and we do our best to provide for our interests”, he said.

When questioned regarding the possible construction of a pipeline on the Caspian seabed from Aktau to Baku, Shkolnik said that it would depend “on the volume of oil”. “It would be expedient (to construct the pipeline-IF-K), if the amount of oil on the route of Aktau-Baku-Tbilisi-Ceyhan will amount to over 20 million tonnes”, Shkolnik said. “At the moment, it makes sense from an economic viewpoint to transport Kazakhstani oil using tankers”, he continued. He added that it is premature to speak about the operator for oil transportation using the Aktau-Baku route.

“The route will be managed by the organization that will transport the oil”, the minister concluded.

Oil and gas condensate extraction in Kazakhstan totalled about 51.3 million tonnes in 2003.

During the next 10-15 years, the republic plans to increase oil production to 150 Million tonnes per year, including 100 Million from the Caspian shelf. Participants in the BTC project are British Petroleum (30.1%), SOCAR (25%), Unocal (8.9%), Statoil (8.71%), TPAO (6.53%), ENI (5%), Itochu (3.4%), ConocoPhillips (2.5%), Inpex (2.5%), TotalFinaElf (5%), and Amerada Hess (2.36%). (Interfax-Kazakhstan)

Banking and Finance

Russia and Kazakhstan have suggested establishing a CIS development bank with EURO 1 Billion capital, based on the CIS International State Bank, reported Alexei Kudrin, the Russian minister of finance in Washington.

Kudrin said that he discussed prospects for creating the bank during a meeting with the president of the World Bank, James Wolfensohn, held in Washington on October 3. The meeting took place as part of the autumn session of the International Foreign Exchange Fund and the World Bank. The two parties took the opportunity to use the World Bank’s experience to implement the project.

Russia and Kazakhstan plan to be the key shareholders in the new bank, making major contributions to its capital, whereas other countries will be minor shareholders.

“We are going to use the CIS International State Bank as a basis, by changing its charter, goals and objectives”, A. Kudrin announced. He said that the CIS International State Bank was previously founded in order to implement a number of goals similar to those of banks within the Council for Economic Mutual Assistance System, in other words, to perform calculations and to provide trade credit. Mr. Kudrin said that the new bank is expected to deal with issues surrounding the development of the region. The total charter capital of the bank is anticipated to be EURO 1 Billion, and replenishing the bank’s capital will be done step by step over several years. (Interfax-Kazakhstan)

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CJSC SJSB ABN AMRO Bank Kazakhstan acquired 100% of the CJSC Corporate Accumulative Pension Fund (APF) from Phillip Morris Kazakhstan LLP (PMK), the bank’s press-service reported. ABN AMRO plans to merge the fund with the JSC CaspiyMunayGas APF owned by ABN AMRO.

Merging the two funds will result in a stronger marketing position for the new fund. “Larger APFs have more opportunities in the financial markets, giving them the ability to earn more investment revenues for their depositors”, said Gulnara Alimgazieva, vice-president of ABN AMRO JSC CaspiyMunayGas APF.

The sale of another pension fund confirms the main trend in Kazakhstan’s pension services market, which is to enlarge pension funds. According to experts, no more than 5-6 accumulative funds out of the existing 16 will remain in Kazakhstan. (Kazakhstan Today)

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The Kazakhstani private Temirbank has arranged a five-year USD 2 Million subordinated loan to the Latvian Trasta Komercbanka . The CEO of Trasta Komercbanka, Gundars Grieze and Temirbank Board Member, Bakhyt Jolaman signed a related credit agreement on Friday in Almaty.

Jolaman said that the loan is a strategically important step as part of the development of an international banking alliance involving a number of banks from Latvia, Kazakhstan, Kyrgyzstan and Russia, which was established at the IV Almaty conference of banks in 2003.

Trasta Komercbanka is a private Latvian bank actively cooperating with CIS countries; it has national offices in Russia, Ukraine, Belarus, Kazakhstan and Canada. The bank focuses on an exclusive variety of private-banking services.

Temirbank, founded in 1992 is among the ten largest banks in Kazakhstan. Its clients include SMEs. The bank participates in international and domestic capital markets. In May 2003, Temirbank purchased 46% of the stock in the Kyrgyzstan-based Ineximbank. (Interfax-Kazakhstan)

Metals and Mining

Kazakhstan's national uranium company, KazAtomProm has been named the entrusted management of the Stepnogorsk mining and chemical plant (Kamala region). "KazAtomProm and KazSabton LTD have entered into an entrusted management agreement concerning the Stepnogorsk mining and chemical plant," read a KazAtomProm press release to Interfax-Kazakhstan. The announcement indicated that KazAtomProm obtained the mining and chemical plant, a sulphuric an acid workshop at the chemical plant; the mines group No 1 in the Shantobe village as well as auxiliary facilities. KazAtomProm has made "a decision concerning the need to support the core business" concerning application of the Kazakhstani government to KazAtomProm with an offer to examine the opportunity to transfer the Stepnogorsk plant to its management, the message indicates. However, KazAtomProm plans to place no investments into the Stepnogorsk plant due to its projections for a fivefold increase in uranium recovery by 2010 and its transformation into a leader in the global uranium industry. "KazAtomProm has said, there has been an offer on the part of a financial investor with access to uranium consumers" that is interested in KAP's management of the Stepnogorsk plant". According to KazAtomProm experts, USD 75 Million  is required for the rehabilitation of the plant. According to the corporation, currently, the northern uranium fields owned by the Stepnogorsk facility produce approximately 100 tonnes of ore. Meanwhile, "even in the case of a planned increase in production of up to 600 tonnes of uranium ore (maximum possible volume from northern fields), within two years the loading of the plant's processing facilities will be only for 2 months per year," they indicated. Currently, KazAtomProm experts have worked out a program for the launch and subsequent development of Stepnogorsk. (Interfax-Kazakhstan)

***

Representatives of Kazakhstani chrysotile industry are satisfied with a decision made by an intergovernmental negotiations committee not to include chrysotile-asbestos on the “black” list of the Rotterdam Convention. The Chairman of the Board of the Kostanai Minerals JC, Kanat Zhusupov, called this decision a victory of common sense.

“The vote on chrysotile has confirmed once again that entering this mineral onto the list of the most dangerous chemicals and pesticides is without scientific and moreover economic grounds”, he said. In the meantime, Talgat Turumbaev, the Central Asian regional director of the CIS Chrysotile Association and the chairman of he board of Kostanay Minerals JSC believes that “it is too early to rest, as new attempts to introduce measures of discrimination against chrysotile in the framework of the Rotterdam Convention will be made”.

In view of this, representatives of the domestic chrysotile industry deplore that “Kazakhstan has not officially signed and ratified the Rotterdam Convention. Thus, the country has been deprived of the opportunity to protect its interests internationally” the report stated. (Interfax-Kazakhstan)

Energy and Power

The Chairman of the board of RAO UES of Russia Anatoliy Chubais in his report at the conference "Russia: Investments into a Growth Economy" summed up the results of the purchase of core assets abroad during the last year. As was reported earlier, the energy holding has acquired a significant part of the generation capacity of Georgia for the period in question. This includes 20% of generation and 35% of distribution capacity. Chubais said that the RAO UES business "is developing successfully". The company has also purchased 85% of generation capacity in Armenia. RAO UES of Russia is satisfied with the first year of results and intends to move further.

Currently, according to Chubais, serious negotiations are underway in Tajikistan and Georgia, where large-scale projects are planned, which could result in a major new project. He also reported that difficult negotiations in Kazakhstan are being completed, and expressed the hope that they will end in the acquisition of 50% of shares in one of the largest power plants in Kazakhstan. (RusEnergy)

***

Kazakhmys, a copper corporation, produced 323 646 tonnes of refined copper in the period from January to September 2004, compared to 306 243 tonnes produced during the same period last year, read a message distributed by the Kazakhmys press service on Tuesday.

In September 2004, the company produced 33 837 tonnes of refined copper.

According to the press-service, Kazakhmys manufactured goods valued at KZT 126.427 Billion from January to September 2004, showing an increase of KZT 38.186 Billion from the previous year.

During the accounting period, the corporation’s mining enterprises extracted 26 438 874 tonnes of ore, which is 2 974 959 tonnes lower than planned. For the same period in 2003, they extracted 30 893 022 tonnes of ore.

The Kazakhmys Corporation produces refined copper and raw materials in Kazakhstan. It united Zhezkazgan, a copper-smelting plant formerly known as Zhezkazganzvetmet, the Balkhash Mining and Metallurgical Center, Zhezkent, an ore mining and processing enterprise, the Eastern-Kazakhstan Copper and Chemical Center, and others.

Samsung is among the shareholders of the corporation. (Interfax-Kazakhstan)

Transport and Telecommunications

Microsoft has doubled its total sales in Kazakhstan in the 2004 financial year from July 1, 2003 to June 30, 2004, Microsoft Director for Kazakhstan and Central Asia Aidar Dauletov told a press conference on Monday in Almaty.

“Microsoft sales in Kazakhstan in the 2004 financial year grew by 114-115% compared to the same period in 2003, and in general Microsoft sales increased in Central Asia increased by 112%,” he specified.

Dauletov emphasized the previous financial year in which Kazakhstan accounted for 88% of the total sales in Central Asia, whereas in 2004 Kazakhstan accounted for 90%. The share of Turkmenistan accounted for 4%, Kyrgyzstan - 3%, Uzbekistan - 2% and Tajikistan - 1%. Microsoft’s success in Kazakhstan in 2004 is due to a number of factors connected with the growth of the computer market in the republic, an active Microsoft marketing campaign and a decrease in the use of pirated software.

Mr. Dauletov noted with regret, the current level of computer piracy in Kazakhstan “is still rather high” according to data from independent experts, which show that pirated copies constitutes 90% of the total share of all computer products used in the country. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week