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Politics and Macroeconomics

Russia To Sign PSA With Kazakhstan

Russia and Kazakhstan are expected to sign a production sharing agreement on the Kurmangazy oilfield by the end of the year, the Russian Prime Minister, Mikhail Fradkov told reporters on Friday after talks with his Kazakhstani counterpart, Daniyal Akhmetov.

“The draft of a long-term plan for oil production and supply for the two countries is now nearing completion,” he said. “We will soon complete our work toward satisfying the interests of the two countries. The consumption of oil and gas in our domestic markets and those of other countries is being considered,” he said.

Kazakhstan and Russia have agreed on the joint development of the Kurmangazy oilfield in the spring of 2002. KazMunayGas owns 50% of the Kurmangazy project, while Rosneft of Russia owns 25%. Zarubezhneft, a Russian company, controls the remaining 25% of shares in the JV.

The RK estimates 0.9-1 Billion tonnes of oil reserves are in Kurmangazy. The amount of investment needed to develop the field was estimated to reach $10 Billion. (Interfax-Kazakhstan)

Equities

The KASE-Shares index decreased by 0.05% to 202.97 by the end of period on October 12 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 October 6 and October 12 2004, the volume of equity trades at the KASE increased to USD 33,988,283 from USD 14,630,098 in the previous period. The shares traded during the period were common shares of Alliance Bank (ASBN), Bank CenterCredit (CCBN), Charaltyn (HRLT), Narodniy Bank (HSBK), Kazakhmys (KZMS), Ordabasy (ORDB), Rakhat (RAHT), Rosa (ROSA), Temirbank (TEBN), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of Alyuminiy Kazakhstana (ALKZp), SNPS-AMG (AMGZp), ATF Bank (ATFBp), KazChrome (KZCRp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

The president of the Caspian Pipeline Consortium, Ian MacDonald, announced at the 12th international oil and gas conference KIOGE 2004 in Almaty on Thursday, that the pipeline will generate USD 1.5 Billion per year by transporting 67 million tonnes after a full loading. “67 million tonnes per year at current tariff rates will generate well over USD 1.5 Billion per year in tariff revenues, providing both host governments with a high-level of secure income for the next 35 years”, reported the consortium press service. The forecasts made by CPC shareholders require a fully expanded system by 2008 with the capacity to move at least 67 millions tonnes of oil per year. Developments at both the Russian and Kazakhstani sectors of the Caspian will require over 50 million tonnes of oil per year from the CPC.

The Russian Federation owns 24% of the CPC, the Republic of Kazakhstan owns 19%, the Sultanate of Oman owns 7%, Chevron Caspian Pipeline Consortium Company owns 15%, LUKArco B.V. owns 12.5%, Rosneft/Shell Caspian Ventures Limited owns 7.5%, Mobil Caspian Pipeline Company owns 7.5%, Agip International NV owns 2%, BG Overseas Holding Limited owns 2%, Kazakhstan Pipeline Ventures LLC owns 1.75%, and Oryx Caspian Pipeline LLC owns 1.75%. (Interfax-Kazakhstan)

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Kazakhstan is analysing the possibility of participating in the Orenburg Gas Refinery (GPZ) expansion project, Prime Minister Daniyal Akhmetov announced in Astana after bilateral talks with Russian Prime Minister, Mikhail Fradkov.

“We are analysing the possibility of participating in the expansion of the Orenburg GPZ, and are considering constructing a gas refinery at Karachaganak,” he said. Mr. Akhmetov emphasized that “we will be guided by the economic efficiency of the project in order to make a decision.” “This project must be profitable for both Kazakhstan and Russia,” he pointed out. (RusEnergy)

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President Nursultan Nazarbayev met with the Chair of the Board of Directors of BG Group Plc., Robert Wilson on Wednesday in Astana.

According to the press release, they discussed projects connected with the company’s projects in the oil and gas sector of Kazakhstan. The press release specifically stated that BG has invested more than USD 1.5 Billion into Kazakhstan’s economy.

Mr. Wilson also met with Prime Minister Daniyal Akhmetov. They discussed cooperating on projects related to the Karachaganak and Kashagan oil fields. “Kazakhstan is interested in cooperating further with BG Group and anticipates greater activity, specifically on the Karachaganak project”, said the prime minister. During their meeting, the head of BG Group informed the prime minister that the company’s regional office would move to Astana. Wilson was appointed chairman of the board of directors of BG Group Plc. on January 1, 2004 is making his first visit to Kazakhstan.

Earlier, BG had announced its intention to sell its stake in Agip KCO, which operates a number of oil fields in the Kazakhstani sector of the Caspian Sea, Kashagan being the largest of these. Members of the consortium and the government of Kazakhstan want to buy the 16.67% share, valued at USD 1.23 Billion.

The remaining shareholders in the consortium are ENI, TotalFinaElf, ExxonMobil, and Shell, each with a 16.67% share, Inpex and ConocoPhillips with 8.33%.

Agip KCO was created as a result of a PSA signed in 1997 for a period of 40 years. The consortium plans to launch industrial exploration in 2007-2008. According to Agip KCO, Kashagan is estimated to contain 7-9 billion barrels of recoverable oil reserves, and 38 billion barrels of total reserves.

BG and ENI own 32.5% each in the Karachaganak development project; ChevronTexaco owns 20% and LUKOIL 15%. These companies make up Karachaganak Petroleum Operating, created in accordance with the PSA, which went into effect in 1998. (Interfax Kazakhstan)

Banking and Finance

Following the third quarter of 2004, the assets of the Bank CenterCredit JSC have exceeded USD 1 Billion. This achievement coincided with the 16th anniversary of the bank, the bank Press Secretary, Zhanna Mambetova stated.

Bank CenterCredit is the most dynamic developing bank in Kazakhstan. Since the beginning of the year, its assets have increased by over 70%, and in comparison with October 1, 2003 by 88%. Net profit at the bank during the third quarter of 2004 was KZT 1.8 Billion. The company’s capital increased by 40% and totalled KZT 15 Billion in October 1, 2004.

Bank CenterCredit is among the five largest banks of Kazakhstan. The long-term rating on foreign currency bank deposits,“Ba1” was granted to the bank by Moody’s Investor’s Service, and Fitch Ratings gave a “B+”. (KazInform)

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Narodniy Bank of Kazakhstan (NBK) has acquired 100% of shares in the Kairat Bank OJSC, one of the largest banks in Kyrgyzstan. By September 1, 2004, the authorized capital of the acquired bank was USD 4.04 Million and its assets were valued at over USD 7.5 Million.

NBK is a private commercial bank of Kazakhstan and owns a network of branches throughout the country. It has 526 subdivisions, 3 foreign representative offices in Great Britain, Russia, and China, and is the parent company of the Russian Bank Khlebny, 76.88% of its shares were bought in Chelyabinsk in April 2004.

NBK currently has assets valued at TN 323.9 Billion, and its own capital is valued at TN 27.7 Billion. Client deposits have reached TN 189.5 Billion, of which TN 102.2 Billion are personal deposits. By September 30, NBK’s authorized capital reached TN 15.8 Billion. (KazInform)

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Narodniy Bank of Kazakhstan has successfully completed a deal that placed its first five-year Eurobonds worth USD 200 Million with interest rates of 8.125% on international capital markets. The lead managers of the issued bonds are JP Morgan Securities Ltd. and Credit Suisse First Boston (Europe) Limited.

During the process of placing the Eurobonds, applications from investors significantly exceeded the planned volume; American investors were most interested. The five-year bonds received a rating of Baa2 from Moody, B+ from Standard and Poor’s and BB- from Fitch.

This emission is the first for Narodniy Bank of Kazakhstan, the success of which confirms its stability and trust of foreign investors. Moreover, the successful placement of Eurobonds increases the bank’s potential in international financial markets. (KazInform)

Metals and Mining

The net profit of the Ust-Kamenogorsk Titanium-Magnesium Plant (UKTMP) JSC in the East Kazakhstan Oblast totalled KZT 327 993 000 as of the first six months of 2004, according to company financial reports.

As of July 1, 2004, company assets totalled KZT 8.911 Billion (compared with the same time of last year, when it totalled KZT 8.428 Billion). According to the report, UKTMP owned capital at the mentioned date grew to KZT 8.148 Billion from KZT 7.496 Billion in the last year; and charter capital increased to KZT 157.549 Million from KZT 21.582 Million respectively.

The company’s main activity is the manufacture and sale of non-ferrous metals, in particular high quality titanium sponge, commercial magnesium. (Interfax-Kazakhstan)

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KazZinc JSC has created its first mining subsidiary, Shubinskoe, a Limited Liability Partnership. The newly established enterprise will produce pyrites and complex ores from the Shubinskiy deposit in the vicinity of Ridder, East-Kazakhstan Oblast (EKO).

KazZinc’s new company will begin developing the deposit during the 4th quarter of 2004. The deposit’s reserves have been estimated to contain around 1.5 million tonnes of ores. The Shubinskiy deposit had been operated by VITIZ LP, from which KazZinc formerly purchased ore.

KazZinc plans to produce from 124 to 140 thousand tonnes of ore annually from the Shubinskiy deposit. The ore will be processed at the Ridder Enrichment Plant, where it is also supplied from the Tishinskiy and Ridder-Sokolnyi deposits owned by KazZinc. Around 1.4 million and 2 million tonnes of ore are produced annually from the two deposits respectively. (Interfax-Kazakhstan)

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The production of reinforced concrete products is rapidly growing in Petropavlovsk. Edinstvo LLP, established on the basis of the Zhelezobeton JC, which went bankrupt in 1999, is producing iron-concrete goods. The enterprise has increased its output by five times this year compared to last year, and 100 times compared to 1999.

After the North-Kazakhstan Oblast revitalized the construction industry and implemented a large-scale residential construction program, the enterprise’s products have been in great demand. Edinstvo LLP produces reinforced concrete slabs, ceiling panels, columns, well shafts, and piles. The plant has restored all technological lines and the equipment is being used to its maximum capacity. The goods have recently successfully passed strength tests.

According to Edinstvo LLP Director, Marat Mergenov, the plant produced reinforced concrete goods worth KZT 22 Million last year, and plans to manufacture products worth KZT 300 Million and to double the number of employees in 2005. The plant has enlisted the support of North Kazakhstani partners, namely Rustem LLP, Imstalkon CJSC, and Lira LLP. It entered the construction materials markets in Astana and Kokshetau and continues to search for new clients and markets. (KazInform)

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)

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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

The Kazakhstani Association of IT Companies and a Microsoft representative in Kazakhstan have concluded a Memorandum of Partnership, the main purpose of which is to assist in the development of the industry and IT market in Kazakhstan. The general director of Microsoft in Kazakhstan, Aidar Dauletov, and the Executive Director of the Kazakhstani Association of IT Companies, Amiret Konysbaev, signed the document on Tuesday in Almaty.

“The partnership between the association and the international software corporation is poignant at a time when Kazakhstan is entering the WTO. We believe that we need stick together in order to make Kazakhstan’s IT market civilized and progressive” Mr. Konysbaev stated at the signing ceremony.

He said that the current level of development in the IT industry in Kazakhstan “is far from being in the best situation”. The industry in his opinion is characterized by a high level of computer piracy, totalling up to 90% of all software sold on the market according to experts.

In addition to providing expert assistance, the two parties intend to implement the creation of an IT-park in Kazakhstan through the introduction of an electronic government system. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 19 October 2004