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Politics and Macroeconomics

200 Ships Needed To Develop Caspian Shelf

Kazakhstan will require 200 ships in order to develop the hydrocarbon reserves on the Caspian shelf as part of the nation’s long-term plans.

“Rapid growth of Caspian offshore operations to extract oil, constructing artificial islands, transporting crude oil, and overall services for petroleum projects requires a large amount of additional sea transportation, up to 200 ships,” stated the Director of Transportation Control of the Ministry of Transportation and Communication Raisa Adamova

She said, “Currently, all civil ships under the state flag have been rented from foreign owners.” Right now, 84 ships use the state flag. In 2003, Kazakhstan adopted a program for the development the Caspian shelf hydrocarbon resources. By 2015, the level of oil extraction from the Caspian shelf in Kazakhstan will reach no less than 100 million tonnes out of 150 million tonnes from the entire country.

Industrial development on the Caspian shelf is expected to begin in 2007-2008. (Interfax Kazakhstan)

Coal Industry Shows Positive Trends

Currently, 31 enterprises, including auxiliary operations of other industries, are engaged in producing coal in the Karaganda Oblast. Based on information from the oblast statistical department, almost 30 million tonnes of coal was produced in 2003; a 12% increase from 2002 and 1.7 times greater than in 1999.

The oblast statistical department noted the positive trends in the coal industry of the region. Karaganda Oblast is the second leader in the coal market in Kazakhstan.

Statistical specialists pointed out the effects of annual demand. By the end of 2003, output of power-generating coal increased by 4.1 %. Compared to 1999, the total output grew by 85.7%. (KazInform)

Steel Production Increases

From January to October 2004, Kazakhstan produced 4,560,634 tonnes of crude steel, up 9% compared to the same period of last year.

Kazakhstan also produced 8,347,210 tonnes of bars of steel and other primary forms and semi-products this year, which is 8% higher than the same period of 2003. Stainless steal production is up 1.6 times compared to last year totalling 440 tonnes of bars and other primary forms and semi-products.

According to statistical data, the first ten months of 2004 had the following outputs: carbon electric steel at 210,299 tonnes, 2.17 times more than the same period last year; and flat materials equalling 3,384,674 tonnes, which is up 6%. These include 244,185 tonnes of tin and tinned sheet products, up by 9%; galvanized rolling at 651,484 tonnes, up by 11%. (Interfax-Kazakhstan)

Deficit To Be Increased

It has been proposed to increase the national deficit for 2005 by KZT 13.6 Billion (current exchange rate is 130.83/USD 1) up to KZT 101.4 Billion, or by 1.7% of the expected GDP next year. The joint commission of parliament decided to increase the deficit after considering proposals for a draft law on the national budget for 2005 made by deputies, the Head of the Commission, and Majilis Deputy Tolebek Kosmambetov stated.

“The plan is to increase the deficit by KZT 13.6 Billion raising it to KZT 101.4 Billion, or 1.7% of GDP,” he said on Monday at a joint session of parliament. The budget for 2005 shows a KZT 5 Billion increase in revenue and KZT 18.6 Billion in expenditures, Mr. Kosmambetov said.

KZT 11.2 Billion due to receipt of corporate taxes, and decreased by KZT 6.2 Billion because of the reduced receipt of VAT will increase revenues. Tolebek Kosmambetov explained that this decision was made because regulations governed by draft amendments to the Tax Code related to capital allowances would come into force in 2006, as agreed upon by the government and deputies. (Interfax Kazakhstan)

Gold Currency Reserves Growing

Gold currency reserves (GCR), including total reserves in the National Bank and funds accumulated by the National Fund of Kazakhstan grew by 5.5 %, up to USD 11,897.7 Million in the first half of November. The National Fund, according to preliminary data, is USD 497.3 Million as of November 16, the National Bank reported on Wednesday.

Purchasing currency on the internal market and receipts on the accounts of the Ministry of Finance in the National Bank brought an additional USD 508.2 Million to the net currency reserves during the first half of November. Meanwhile, the National Bank’s gold assets grew by USD 22.2 Million in this reporting period as a result of the National Bank’s gold operations and a 2.5% growth in the price of gold in world markets. As a result, the National Bank’s net GCR grew by 7.5% during the first half of November, totalling USD 7,596.1 Million. (Interfax-Kazakhstan)

Equities

The KASE-Shares index decreased by 1.03% to 207.24 by the end of period on November 16 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 November 10 and November 16 2004, the volume of equity trades at the KASE increased to USD 17,050,946 from USD 8,156,325 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank CenterCredit (CCBN), Bank Caspiysky (CSBN), Ordabasy (ORDB), Temirbank (TEBN), ValutTransit Bank (VTBN), ValutTransit Zoloto (VTZL) and Zerde (ZERD) and preferred shares of ATF Bank (ATFBp and ATFBp8), Kazakhtelecom (KZTKp), MangystauMunayGas (MMGZp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

TengizChevroil, responsible for developing the Tengiz oil deposit in Western Kazakhstan, sold 2.8 million cubic meters of dry gas including 1 million cubic meter supplied to Russia in January-October 2004, a TCO press release reported.

TCO sold a total of 3.2 million cubic meters of dry gas in 2003, including 1.3 million to Russia. TCO extracted 3.9 billion cubic meters of gas in January-October this year, which is 5.3% higher compared to the same period of last year.

TCO produced 696 thousand tonnes of propane and butane from January to October of this year, of which 688.5 thousand tonnes were sold in the reporting period including gas produced in December 2003. Propane and butane production reached 709 thousand tonnes in 2003. In January-October 2004 the company extracted 11.3 million tonnes of oil, 6.7% more than last year.

TCO started extracting oil at Tengiz in 1994 after concluding an equal shares agreement between Chevron and Kazakhstan in1997. The JV participants are American ChevronTexaco Overseas with a 50% share, ExxonMobil Kazakhstan Ventures Inc at 25%, Kazakhstan represented by the national oil and gas company. KazMunayGas with 20% of the shares, and Russian-American JV LUKArco with 5%. (Interfax-Kazakhstan)

***

The new rules governing the priority right of the state to purchase stakes in oil and gas projects could be in contradiction with the principle of contract stability as proclaimed by Kazakhstan, the Regional Director for LUKoil Overseas Kazakhstan, Boris Zilbermints said.

“Earlier, the law placed the priority right for the purchase of shares on the other project participants in the event that one of them leaves a project. Now, a new, strong player has emerged,” he said. As was reported earlier, on November 5 the Kazakhstani Parliament adopted amendments to the subsoil use and petroleum operations legislation, giving the priority right for the purchase of subsoil use and/or shares in production, including hydrocarbon reserves to the government.

Earlier, oil deposit contracts “never mentioned any other priority right”, other than those possessed by the participants, he said. But Zilbermints expressed his hope that Kazakhstan, which expects the production of large volumes of oil on the Caspian shelf, will soften the tax regime that it introduced during early 2004 for new oil projects. (Interfax Kazakhstan)

Banking and Finance

JSC ValutTransit Bank (VTB) signed an agreement on November 11 to receive a syndicated loan worth USD 6 Million. The participants of the short-term credit with possible prolongation for VTB are Bank CenterCredit, ATF Bank, Eurasian Bank and Temirbank.

According to the chair of the board of trustees of VTB, Kairat Kashenov, the agreement is not only the first experience for VTB in attracting a syndicated loan, but also the first deal in which a Kazakhstani syndicate organized a loan for a Kazakhstani bank. While organizing the loan, the participants expressed their interest in increasing the agreed sum. “We planned to attract a syndicated loan worth USD 5 Million, but the banks expressed their trust and increased the sum of the credit,” Mr. Kashenov said.

VTB is among the top three banks in Kazakhstan with the biggest regional network (14 branches, 119 cash departments, 179 exchange bureaus).

Chairman Kashenov said that international loans are a possibility for VTB. “Receiving a syndicated loan from Kazakhstani banks is a positive experience that allows us to believe that going to foreign capital markets will be as successful,” he said. (Kazakhstan Today)

Metals and Mining

During the end of last week, the steel magnate Lakshmi Mittal visited the Ispat-Karmet JSC in Temirtau. The purpose was to inform the subsidiary of recent changes at the LNM Group of companies.

According to Mr. Mittal, Ispat-Karmet currently belongs to a global company, a world leader in metallurgical production. The second stage of the creation of the world’s largest steel-casting organization has now been completed. At first, two subsidiary companies were merged, Ispat International, in which L. Mittal owned 77% of shares, and LNM Holdings (100%).

The newly organized company received the name of Mittal Steel. It purchased one of the largest North American metallurgical enterprises, International Steel Group (ISG) for USD 4.5 Billion. As a result, according to L. Mittal, the distribution of forces on the global steel casting market has drastically changed. His company, Mittal Steel now occupies 6% of world metallurgical production. This amount is greater than that of the recent leader, the Spanish-French Arcelor.

Mr. Mittal said that the company reorganization was completed on October 25, and the first enterprise he then visited was the Temirtau metallurgical plant.

Mittal’s address to Ispat-Karmet employees read, “During the transition period, operations will continue as usual. The head offices will remain in Rotterdam and London. These events are of great importance for our company, they will provide tremendous growth opportunities for our employees”. (KazInform)

***

Bogatyr Access Komir (BAK), located in the Pavlodar Oblast, hopes to increase production up to 36 million tonnes this year, a 9% growth compared to 2003.

The press service said that BAK increased coal production by 13.3% from January to October 2004 compared to the same period of last year.

The growth of production and subsequently of financial leverage will allow the company to further modernize the Bogatyr and Severniy mines as part of their technology program.

The press service also noted that at the same time, the company is planning to increase production, a lack of railway cars used to ship coal to consumers because of railway personnel could negatively affect the implementation of their plans, however.

Earlier, Dennis Price, the general director of BAK said that the company is planning to increase their annual coal production to 48 million tonnes by 2015.

Last year, BAK recovered 33 million tonnes of coal, up 15% from 2002. 32.97 million tonnes were shipped to domestic and international markets.

Bogatyr Access Komir is a branch of Access Industries Inc, which won a tender in 1996 to mine the Bogatyr, the largest coal mine in Kazakhstan with an annual capacity of 50 million tonnes of coal.

BAK is developing the Ekibastuz coalmine, turning out 10.4 billion tonnes of coal.

BAK is Kazakhstan's largest coal supplier to energy enterprises in Russia and Kazakhstan. (Interfax-Kazakhstan)

Energy and Power

Due to a lack of railway cars supplies, Ekibastuz LLP Bogatyr Access Komir is unable to provide its customers, the Astana and Almaty heat power plants and budgeted organizations with sufficient coal.

“The Bogatyr mine does not receive even one fourth of the planned wagons each month,” the press service said. The delivery problems on the part of Kazakhstan Temir Zholy emerged in August 2004. Over a three-month period, the railroad failed to provide 19 routes for the transportation of 87 thousand tonnes of coal to budgeted organizations. This same reason led to a reduction of coal sales to the Almaty heating plant-3, the Kokshetau district boiler house No. 2, and the Astana heat power plant. For 8 days of November, Bogatyr found itself unable to send over 30 thousand tonnes of coal to these organizations. Due to the coal deficit, the Almaty heat plant-3 is operating under economizing procedures. “If during upcoming days, coal is not supplied to the plant, operations could be halted,” BAK LLP says.

Bogatyr Access Komir has said the company is prepared to supply enough coal for its consumers. However, the railway company continues to let them down. Bogatyr Access Komir is a daughter enterprise of American Access Industries Incorporated. Since 1996, BAK LLP has owned the Ekibastuz coalmine Bogatyr, since 1999 – the Severny mine. (Kazakhstan Today)

***

Kazakhstan plans to supply 4.5 billion kWt/hour of electrical energy to Russia in 2004, reported Esbergen Abitayev, vice president of KEGOC, in Almaty during the third international conference, Power Kazakhstan 2004. Meanwhile, the vice president of American AES Corporation, Dale Perry, told journalists in the lobby of the conference that the AES-Ekibastuz station in the Pavlodar Oblast plans to supply about 1.5 billion kWt/hour to Russia in 2004.

“Currently, we sell 25% of the total volume of electrical energy produced at the station to Russia,” he said. “Moreover, AES is now conducting negotiations with Russian companies to conclude long-term contracts for the supply of electrical energy produced at AES-Ekibastuz.”

AES has owned AES-Ekibastuz since 1996. It also owns a number of heat power plants in East Kazakhstan, has on concession Ust-Kamenogorsk and Shulbinsk hydropower plants, and manages two distribution electrical companies in the east. In 2003, AES- Ekibastuz produced 6.4 billion kWt/hour. On average 20% of the energy is exported to Russia. (Interfax Kazakhstan)

***

The Atbasar locomotive repair plant in the Akmola Oblast will launch a new workshop in the summer; costing KZT 500 Million. Atbasar is the only electrical locomotive repair plant in Kazakhstan. Cleaning, repair, painting and drying of locomotives were done in one workshop for 50 years.

Finding spare parts for full restoration is a constant problem for the plant. The plant received parts 5 to 6 months ago from Russia allowing it to increase its operations by 1.5 times. Last year, 5 electric locomotives were repaired, now 6-7 are being repaired every month. Since the beginning of this year, work has been properly organized. According to the workers, they are now satisfied with their salary payment system. (KazInform)

Transport and Telecommunications

Bogatyr Trans, a subsidiary of Bogatyr Access Komir BAK LLP in Pavlodar Oblast, will invest KZT 150 Million to build its own repair station in 2004. Bogatyr Trans was established in April of 2002.

The US-based Access-Industries, Inc. in Kazakhstan combined the operations of three subsidiary structures into one operational organization for the new project: BAK LLP, which produces coal; Bogatyr Trans LLP, a coal transportation company; and Access Energo LLP’s TETS station in Petropavlovsk, an electrical and heat energy production company.

According to the information provided by the press service, Bogatyr Trans LLP owns around 2,700 high-sided wagons compared with 70 wagons when the company was established. Currently the depot overhauls 120-130 wagons and repairs 1,400-1,450 sets of wheels per month.

Bogatyr Trans LLP makes shipments to the oblasts of North-Kazakhstan and Akmola, and also to the oblasts of Sverdlovsk and Chelyabinsk in Russia. Since the beginning of the company’s operation, they have shipped more than 15.3 million tonnes of cargo. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 9 November 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: zhonar@maverick.kz or newswire@ges.kz

For more information and other publications please contact Yelena Kovalenko at +7 (3272) 596 708

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