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Politics and Macroeconomics

Bashkiria Asked To Create Petrochemistry Industry

Prime Minister Daniyal Akhmetov has asked Bashkiria of Russia to take part in the development of a petrochemical sector in Kazakhstan. “We are pleased that we have a great deal of different areas for mutual cooperation. We believe that the Republic of Bashkortostan possesses a strong capacity to cooperate in the petrochemical sector”, Akhmetov announced at an Astana press conference following a meeting with the Head of Bashkiria, Murtaza Rakhimov.

Akhmetov said that Bashkiria has a leading position in developing Russia’s petrochemical industry, which is an area of great interest for Kazakhstan. He also said that the construction industry is a promising area of cooperation as well.

According to a press release from Kazakhstan’s Ministry of Foreign Affairs, commodity turnover between Kazakhstan and Bashkiria from January to August this year was about USD 209 Million, which is the second highest turnover among all of Bashkiria’s partners with a 9.5% share. Exports from Bashkiria to Kazakhstan were USD 155.7 Million last year, while Kazakhstani exports to Bashkiria were USD 80.8 Million.

The main exports from Bashkiria to Kazakhstan were minerals, fuel, chemicals, caoutchouc, cars, and equipment. Rakhimov came to Kazakhstan on Friday for a one-day business visit. In the morning he met with President Nursultan Nazarbaev. (Interfax Kazakhstan)

Strengthened Control Over Foreign Borrowings By Banks

The Kazakhstan State Agency for Financial Control (AFC) will strengthen its monitoring of external borrowing on the part of commercial banks, the AFC Director, Bolat Zhamishev announced. “We want banks to evaluate their risks adequately by taking into account increased external borrowing risks”, Zhamishev said.

AFC “carefully evaluates the dynamics of increased external borrowing on the part of certain banks” which lead to an overall increase in external debt in the banking sector. However, he noted, the banking sector debt represents only a small portion of the international debt held by the country, which is why its does not threaten the overall international position of the country.

The National Bank Chair, Anvar Saidenov stressed that currently, Kazakhstani banks operating on external borrowing could receive cheap long-term resources that they could apply to the national market. This is evident he noted, from the recent eurobonds placement of USD 200 Million by Narodny Bank of Kazakhstan, the upcoming eurobonds’ issue of USD 200-300 Million by Kazkommertsbank, and overseas expansion plans on the part of ATF Bank and TuranAlem.

During July 1 of this year, gross international debt held by Kazakhstan totalled USD 25.8 Billion, including USD 4.6 Billion in banking sector debt. (Interfax Kazakhstan)

Equities

The KASE-Shares index increased by 0.65% to 204.29 by the end of period on October 19 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 13 and October 19 2004, the volume of equity trades at the KASE decreased to USD 27,890,908 from USD 33,988,283 in the previous period. The shares traded during the period were common shares of Alyuminiy Kazakhstana (ALKZ), Astana-Finance (ASFI), Bank TuranAlem (BTAS), Kazakhmys (KZMS), Kazakhtelecom (KZTK), KazZinc (KZZN), Ordabasy (ORDB), Rakhat (RAHT), Temirbank (TEBN) and ValutTransit Bank (VTBN) and preferred shares of KazChrome (KZCRp), ValutTransit Bank (VTBNp) and ValutTransit Zoloto (VTZLp). (Irbis)

Company News

Oil & Gas

GeoTeniz of Kazakhstan and Yuzhmorgeoeco of Russia began geotechnical operations at the Tyb-Karagan field as ordered by the Tyb-Karagan Operating Company, a branch of KazMunayGas and LUKoil Overseas.

According to company plans, data needed to construct a self-elevating floating drilling rig and the drilling plan of the first probe well will be obtained in two months. Four 50 m wells needed to support the drilling rig are being considered. The average depth of the sea in the 1,372 sq. m area is 10 m.      The closest port, Bautino in the Mangystau Oblast, is within 40 km from the block.

The geological resources at Tyub-Karagan have been estimated at 426 million tonnes of oil equivalent including 320 million tonnes of oil. The commercial launch is possible in 2005 and industrial use will begin in 2012. Maximum annual extraction is estimated to reach 7.2 million tonnes by 2015. (KazInform)

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On October 16, one of the largest oil and gas condensate deposits in the country, Karachaganak, celebrated its 25th  anniversary of the day the reserves were discovered and officially confirmed. This was the largest achievement made by geologists. The deposit occupies an area of 280 square kilometers and contains unique treasures; 1.2 billion tonnes of oil and over 1.35 trillion cbm of gas.

“Currently, Karachaganak is one of the largest investment projects in Kazakhstan with a volume of USD 4.3. Billion in foreign capital investments” said Karachaganak Petroleum Operating General Director Paolo Campelli at an international conference in Almaty. The deposit is operated by 4 international companies: the BG Group from Great Britain, Eni from Italy, ChevronTexaco from the USA and LUKoil from Russia.

At the beginning of the summer, the company loaded their first batch of oil from the offshore terminal of the Caspian Pipeline Consortium (CPC). Now, 550,000 tonnes of oil is transported monthly. In the future, the company plans to transport around 7 million tonnes of oil annually, using the 635 km Karachaganak-Bolshoy Chagan-Atyrau pipeline. KPO has become the second largest supplier to the CPC after JV TengizChevroil. (KazInform)

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The international consortium Karachaganak Petroleum Operating B.V. (KPO), responsible for developing the Karachaganak oil and gas condensate field in Western Kazakhstan, is looking for new export routes to enable it to increase the production of liquid hydrocarbons and gas, KPO General Director Paolo Campelli announced.

Campelli emphasized that KPO broke its own record last Saturday by processing 243,000 barrels of gas condensate and over 20,000 cbm of gas per day at Karachaganak processing plants, totalling 383,000 barrels of oil equivalent.

Campelli announced that Karachaganak Petroleum Operating and Kazakhstan's national oil and gas company, KazMunayGas, are researching possible ways to increase their transportation quotas of Karachaganak gas condensate through the Caspian Pipeline Consortium system. They are also discussing the possibility of using the Transneft Pipeline system via Bolshoy Chagan to Samara.

“Currently, the most important issue for the consortium is gas sales”, he said, “Since the increase in volume of liquid hydrocarbons production is directly correlated with the growth of natural gas production.”

“Kazakhstan and Gazprom must coordinate their projects to either increase the capacity of the Orenburg gas refinery or construct a gas refinery in the West Kazakhstan Oblast,” Campelli noted.

The Karachaganak field is one of the world’s largest, with reserves of 1.2 billion tonnes of liquid hydrocarbons and 1.3 trillion cbm of gas. The field is being explored in accordance with the KPO production sharing agreement between Italian Eni and British BG with a 32.5% share each, ChevronTexaco with a 20% share and Russian oil company LUKoil with a 15% share. (Interfax Kazakhstan)

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The Kazakh Institute of Oil and Gas (KIOG) and U.S. based Halliburton have created Joint Venture, Petrodata Kazakhstan, which will be the technical operator of the national databank of oil and gas projects.

“The basic task of the national databank is the management of a database of oil and gas projects in Kazakhstan,” the Chair of the Geology and Subsurface Protection Committee of the Ministry of Energy and Mineral Resources, Bolat Uzhkenov, said.

He explained that in October 2003 in Almaty, the committee and a number of oil companies operating in Kazakhstan signed an agreement creating the national databank. The companies include Petrom, YUKOS, KazGerMunay, KPO B.V., Agip KCO, CNPC-AktobeMunayGas, PetroKazakhstan, Fioc, ChevronTexaco, Turgay Petroleum and KazMunayGas.

Uzhkenov said that the petroleum companies would finance the operations of the databank. In turn, the government will provide “historical information stored in the Committee of Geology’s archives.” Moreover, it is planned to integrate the national databank with the KazMunayGas corporate database. The information that accumulates in the databank will be provided to participating companies on a commercial basis.

The central server of the national databank will be located in Astana; regional servers will be in the southern and western regions.

A press release from KIOG specifies that the national databank for oil and gas has been created using technology from PetroBank, which is designed by Halliburton. This technology has been introduced in 8 countries including Norway. (Interfax Kazakhstan)

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The Kazakhstani Parliament could provide the state the priority right for the purchase of subsoil use rights. This issue will be discussed during the upcoming session of the Majilis. The conciliation commission for both houses adopted the decision to propose amendments into the legislation on subsoil use.

This amendment concerns already signed contracts with private investors, the Majilis Deputy and member of the conciliation commission, Victor Vesnin announced. According to Vesnin, future contracts will take state interests into consideration, while existing contracts must be regulated by the amendment proposed by the Senate.

It is notable that the amendment was proposed when BG Group announced its sale of the 16.67% share in the North Caspian project. Kashagan, the largest explored oil field in the Kazakhstani sector of the Caspian Sea, has reserves estimated at 7-9 billion barrels of oil. Kazakhstan claimed it possessed the priority right for the purchase of the BG share. However, according to the contract, this right belongs to the other six Kashagan shareholders – Eni (16.67%), ConocoPhillips (8.33%), ExxonMobil (16.67%), Total (16.67%) and Shell (16.67%). The Kazakhstani Government is not a consortium participant; but via the national company KazMunayGas, it exerts control over project implementation. However, according to Prime Minister Daniyal Akhmetov, it was Kazakhstan as a consortium member that made offers for the purchase of the share. Kazakhstan is clearly interested in its acquisition, as the purchase would enable them to manage one of the world’s largest oil fields. In regard to money, the Government will obtain the necessary amount “from foreign bank credit or other sources”. Taking the previous agreement on the part of the BG Group with two Chinese oil companies as a guide, the price of the Kazakhstani participation in the North Caspian project could reach USD 1.2 Billion.

Previously, the Government spoke of “the will of the shareholders” and claimed that Kazakhstan “proceeds from a principle of non-interference with shareholders and compliance with norms of the production sharing agreement and legislation”. Now, observers believe that the legislation gives Kazakhstan its priority right to purchase shares in projects for subsoil use, including the North Caspian project. (KazInform)

Banking and Finance

The National Bank of Kazakhstan has written a new draft law “On Currency Regulation and Control” designed to create conditions for the transfer to full convertibility of the national currency, the tenge, a government representative explained.

According the document authors, it was created “to make the transformation to using international principles for regulating currency operations and capital flows, and to create an effective normative legislation base for a gradual transition to the principles of full convertibility of the national currency”. From January 1, 2007, the draft repeals the “norms for currency operations and other limitations on currency”.

The drafted currency monitoring system “allows for the receipt of necessary information on currency operations conducted by subsidiaries and branches of foreign companies in order to reflect operations on balance of payments correctly”.

The draft gives the President of Kazakhstan the right to establish a “special authorization period of 6 or more months in situations that threaten the economic security and stability of the financial system”. This provision conforms to IMF principles and “allows for the elimination of threats of destabilization to the national economy”.

Similar practices conducted by Russia, the Czech Republic, Hungary, Croatia, Macedonia and Poland have been used to help draft the document. (Interfax Kazakhstan)

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Kazakhstan’s gold and currency reserves (GCR), including gross reserves of the National Bank and capital accumulated in the National Fund, fell by 0.5%, down to USD 10,660.8 Million.

On October 15, the National Fund had USD 3963.3 Million, the National Bank said. Net cash currency reserves decreased by USD 137.4 Million down to USD 5,940.6 Million, which was a result of servicing international debt, including the redemption of eurobonds issued in 1999, and the sale of currency in order to increase the assets of the National Fund during the first half of October.

However, the National Bank’s gold assets increased by 0.6% or USD 6.9 Million, reaching USD 752.8 Million, which was a result of an increase in the price of gold and gold operations conducted by the National Bank. Therefore, the net GCR of the National Bank fell by 1.9%, down to USD 6,693.4 Million during the first 15 days of October. (Interfax Kazakhstan)

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“The BTA Ipoteka (subsidiary of TuranAlem) is considering the potential for entering the markets of the CIS countries including Russia, Kyrgyzstan and Ukraine”, the BTA Ipoteka Managing Credit Director, Viktoriya Sarzhevskaya announced at an Almaty press conference on Tuesday. She also said that BTA Ipoteka is “seriously considering” the issue of mortgage backed crediting in Omsk by either establishing a representative office there or purchasing a share in local banks.

Sarzhevskaya believes that already at the beginning of 2005, BTA Ipoteka could provide a total credit of USD 20 Million in Omsk. She said, “The system of mortgage backed credit in Russia is underdeveloped, including legislation and peoples’ awareness, unlike in Kazakhstan.”

Sarzhevskaya announced that BTA Ipoteka also intends “to expand its presence in Kazakhstan through entering Zheskazgan, Kyzylorda, Taraz, Kokshetau and Taldykorgan. Today, the company is present in 12 regions of the country. In 2005, BTA Ipoteka plans to provide credit of USD 200 Million in total, 35-40% of these will be distributed in Almaty. (Interfax Kazakhstan)

Metals and Mining

As of 2004, the Vasilkov Mining and Enrichment Plant JSC (VMEP) began the production of cathode gold based on a new technology. Currently, the enterprise is an industry market leader, plant representatives said at a recent press conference.

In January of 2002, the Vasilkovskoe Zoloto (Vasilkov Gold) joint venture was established. 40 % of shares in the JV are owned by the state, and 60% belong to the Dutch company, Floodgate Holding. Pursuant to an agreement concluded in June 2003, functional obligations for all operations were laid down at the Vasilkov MEP JSC. Over a short period, the enterprise resumed its full-fledged production. Based on experts’ calculations, VMEP’s gold and currency reserves total 360 tonnes. Currently, the Vasilkov quarry has a depth of 85 meters; with a width of almost 2 kilometers. According to the Chairman of the Board Gani Sagiev, the enterprise’s operations are concentrated in one geographical area. The central workshop for the equipment repair operates well. Three more workshops have also been launched.

A gold extraction plant will be opened by 2007. In the beginning, it will produce up to 8 tonnes of pure gold annually. (KazInform)

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Construction of a plant for the manufacture of prefabricated parts and platforms for offshore drilling on the Caspian, as part of a Kaspiyskaya Verf (Caspian Shipyard) project, is planned for completion in 2005, reported representatives of the Kazakhstani-Italian joint venture ErSay Caspian Conductor LLP at an exhibition on investment projects.  The plant is being built in the village of Kuryk in the Mangystau Oblast.

Currently, the ground has been laid for the construction, and 272 jobs have been created. An industrial site for the future plant, a loading dock, and a pier for large-capacity vessels, tankers, dry cargo ships, barges, and cranes will be created on a 50-hectare area. The bottom of the bay will made deeper by 20-30 meters, in order to accommodate these. Breakwaters will also be constructed.

A technical base for the metal plant will be built at the Eralievo station. The equipment is now being shipped.

JV ErSay was established by ERS-Holding, which owns a 50% stake in the JV, and by Italian Saipem, a subdivision of Eni. (Kazakhstan Today)

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Ispat-Karmet OJSC, a member of the LNM Group, plans to begin the construction of a plant in Aktau to manufacture oil and gas pipes by the end of 2005. The company received a 52-hectare plot of land in the free economic zone (FEZ) of the Aktau Seaport to build the plant. The head of the oblast’s department of economy, industry and trade, Adilbek Kusherov reported that they have a backlog of equipment orders to be purchased, and the plant is being designed. “We think that this project will begin at the end of 2005” said Kusherov.

It is expected to receive USD 65 Million as investment into the project. Construction will take 3 years and the number personnel assumed to work on the production is 180 to 240 people.

The decree “On the Creation of the Aktau Seaport Free Economic Area” in the Mangistau Oblast came into effect on January 1, 2003. The purpose of the FEZ is to accelerate the republic’s involvement in peaceful trade by providing for the efficient use of the Aktau port, to guarantee stable economic growth, and reduce the unemployment rate. (Kazakhstan Today)

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A significant rise in cement prices is expected in Kazakhstan in the next 2-3 years. “One can expect a significant rise in cement prices in 2005-2006 followed by a stabilization,” the Chairman of the Board of the Vostok-Cement JSC, Konstantin Morozov, said at the 4th international conference on the cement industry on Tuesday in Almaty. Vostok-Cement JSC is a cement plant located in Ust-Kamenogorsk, East-Kazakhstan Oblast.

Among factors influencing the 10 to 20% increase in cement prices, Morozov said,  “Are an objective increase of cost”, associated with an increase in raw materials and energy prices, and railway tariffs. The rise in cement prices could be associated with the need on the part of plant owners to form investment funds in order to reconstruct these enterprises in to boost output.

In the opinion of the Association of Cement and Concrete Producers of Kazakhstan, Sergey Terekhov said that an increase in cement prices in the short-run is speculative and the construction season should be observed for results.

There are five cement plants in Kazakhstan: Central Asia Cement JSC (CAC) in the Karaganda Oblast, Shymkentcement JSC in the south, Semeycement JSC in Semipalatinsk, Vostok-Cement JSC in Ust-Kamenogorsk and Sas-Tube Cement Plant. The total planned production capacity of all Kazakhstani cement plants is 8.4 million tonnes annually, and the available capacity is 4.9 million tonnes. (Interfax-Kazakhstan)

Energy and Power

The Petropavlovsk electro-insulation materials plant earned KZT 750 Million in profits in the first 9 moths of the year, or 1.6 times more compared to the same period of 2003.

Following the collapse of the USSR in the early 1990’s, the former Kalinin electro-insulation materials plant, one of the largest Soviet entities in this area, was amidst a financial crisis. In 2000, the plant revived after undergoing reconstruction and technical renovation. Today, it is increasing its output and satisfies demand for its products in Kazakhstan. This year, the plant will begin to produce metal construction materials and pneumatic drills, which are highly demanded in Kazakhstan, Russia, Ukraine and Kyrgyzstan. The plant intends to cooperate with countries outside the CIS.

The plant will increase its output by 2 times, up to KZT 1 Billion. International quality standards ISO-9000 will also be implemented. (KazInform)

Transport and Telecommunications

Representatives of the Republican State Enterprise (RGP) Aktau International Commercial Seaport and the Ministry of Transportation and Communications of RK, with participation of representatives of transportation agencies from Russia and Kazakhstan, conducted a round table on the strengthening of bilateral cooperation between the two countries in the transportation sector of the Caspian.

They discussed the following issues: implementing shipments, allowing for the loading of ports in both countries; navigation development; the creation of a legislative and regulatory base necessary to further develop of a Kazakhstani commercial fleet. (Kazakhstan Today)

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The net profit at the national post operator, Kazpochta JSC totalled KZT 170.98 Million from January to September this year, compared with KZT 94.08 Million for the same period of last year, the President of the Board of Kazpochta, Arken Arystanov, reported at a press-conference in Almaty on Tuesday. The current exchange rate is KZT 132.8/USD 1.

“The task of the post office is to provide users, along with traditional services in all 3,326 post office departments, access to the Internet and e-mail services, hybrid and fast mail,” said Mr. Arystanov.

According to Mr. Arystanov, Kazpochta plans to issue a national debit card this year. The card could be used not only for receiving money in a bank or making payments, it will also have a chip that contains information about its holder: TRN, SIC (social individual code), passport data, possibly the driver license number, and even finger prints or a picture of the card holder’s iris.             This means this card will function as an identity card, which can be used in any place in Kazakhstan where a post office is located,” he said. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week