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Politics and Macroeconomics

Boost In Global Precious Metals Prices Helps Eastern Kazakhstan

Based on short-term data from the East-Kazakhstan Oblast Statistics Department, the index for physical industrial output in the region has grown 5% over the first 11 months of the current year. In money equivalent, this growth is about 25%, which can be explained by increases in gold, non-ferrous metals, and food products prices.

Agriculture growth was a somewhat more modest 3%. Small and midsize business output grew by more than 10% compared with the same period of last year. (KazInform)

Investment In Aktobe Oblast Aimed At KZT 488 Billion

According to the medium-term plan for social and economic development of the Aktobe Oblast for 2005-2007, the volume of investments must reach KZT 488 Billion. According to oblast Deputy, Akim Nurmukhammed Abdibekov, the main share, or 80% of investments are funds from economic entities, 13%, comes from foreign investments, the national budget will contribute about 5%, and the local budget 2%.

From 2005-2007, the region will experience the construction and launch of an enrichment plant to refine copper, zinc, nickel-cobalt ores, a copper-smelting plant, and a fiber-plastic pipe, sheet and container glass, sodium carbonate and cement facility. A factory for processing wool will also be reconstructed; and the production and development of prototype X-ray devices with wide functional capacities will continue.

Agricultural production will grow by 34% in 2007 compared to this year. Necessary attention will be given to developing processing industries and production growth in the chemical sector.

The average monthly salary of an Aktobe Oblast resident will grow by 33%; the number of people living below the poverty line will be 17% lower, and unemployment will be decrease by 25 %. (KazInform)

Equities

The KASE-Shares index increased by 3.03% to 219.93 by the end of period on December 21, 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 December 15 and December 21 2004, the volume of equity trades at the KASE decreased to USD 7,527,880 from USD 20,045,529 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank TuranAlem (BTAS), Narodniy Bank (HSBK), Kazakhmys (KZMS), Neftebank (NFBN), Ordabasy (ORDB), S.A.S. (SAS_), Temirbank (TEBN), KazUvelirProm (VTZL) and Zerde (ZERD) and preferred shares of ATF Bank (ATFBp), Bank Caspiyskiy (CSBNp), Narodniy Bank (HSBKp), Kazkommertsbank (KKGBp) and KazUvelirProm (VTZLp). (Irbis)

Company News

Oil & Gas

PetroKazakhstan is pleased to announce that its Board of Directors has approved an increase in its quarterly dividend on its common shares to CAD 0.20 per quarter per share for 2005, versus the current CAD 0.15 per quarter per share. The CAD 0.20 per share dividend will be payable on February 3, 2005 to registered shareholders on January 14, 2005.

PetroKazakhstan Inc. is a vertically integrated, international energy company, celebrating its eighth year of operations in Kazakhstan. It is engaged in the acquisition, exploration, development and production of oil and gas, refining of oil and the sale of oil and refined products.

PetroKazakhstan shares are trading in the United States on the New York Stock Exchange, in Canada on the Toronto Stock Exchange, in the United Kingdom on the London Stock Exchange and in Germany on the Frankfurt exchange under the symbol PKZ, according to a PetroKazakhstan news release. (Golden Eagle Partners)

***

The TulparMunayService (TMS) servicing company, beginning early this year drilled the 100th well at oil deposits in the Mangystau Oblast. "This year, the drilling team regularly followed the production program, and successfully drilled its jubilee well", a company's press release read. TMS conducts oil drilling at the Karazhanbas and North Buzachi deposits.

According to the company, it drilled 46 wells in 2002, 69 wells in 2003, out of which 10 were at North Buzachi for Texaco North Buzachi Inc, which is a JV including Canada's Nelson Resources and China's CNPC International.

TMS conducts operations at one oilrig and uses 17 rigs for well-workover operations.

TMS was established in 2001 for performing drilling and well-workovers. The company started active operation in May 2002. TMS LLP belongs to Canada's Nations Energy Company Ltd, which is the major shareholder of the oil production firm KarazhanbasMunay. (Interfax-Kazakhstan)

***

The ConocoPhillips Board of Trustees has approved the budget for 2005 in amount of USD 6.9 Billion, including USD 0.4 Billion for the development of projects in Russia and the Caspian region, a company message read.

It also said that investments for the development of ConocoPhillips operations in the Caspian region include funds for the further development of the Kashagan project. It also funds a joint venture in Russia with LUKoil in the Timano-Pechora oil and gas bearing province.

As it was reported earlier, Agip KCO participants include ENI (project operator), Total, ExxonMobil, Shell, BG (with 16.67% each), Inpex and ConocoPhillips (with 8.33% each).

According to Agip KCO, recoverable oil reserves at Kashagan are estimated at a minimum of 7-9 billion barrels, and total geological reserves are at 38 billion barrels. The consortium plans to start commercial oil production in 2007-2008.

ConocoPhillips planned to invest over USD 400 Million in the JV in 2004, in which LUKoil will have 70%, and the American company will own 30%. The companies will manage the JV on a parity basis. Its creation is planned for February 2005. (Interfax-Kazakhstan)

***

The JV Sewon Vertex Heavy Industry in the Mangystau Oblast is producing oil and gas equipment on the basis of Kaskor-Mashzavod. 49% of Sewon Vertex Heavy Industry shares belong to South Korea's Sewon E&T and 51% belongs to Kazakhstan's Vertex LLP. According to the General Manager, Kanat Abenov, production was launched a few days ago. The JV was organized in May this year.            

The South Koreans invested about USD 5 Million into the acquisition and installation of equipment. The Kazakhstani organization reconstructed the workshops. Almost one half of the plant's equipment has been modernized. Mr. Abenov explained that the JV is renting this equipment from Kaskor-Mashzavod.

Currently, Sewon Vertex started producing tanks for oil storage with a maximum length of 25 meters and diameter of 4 meters. The capacity of the plant allows it to produce 12 tanks per month.

"We will take the demands of clients into consideration and modify the tank capacities according to their needs. Intensive negotiations are underway with the international consortium Agip KCO, TengizChevroil, KarazhanbasMunay, and with all companies that demand these products," Mr. Abenov stated. (Interfax-Kazakhstan)

***

The national oil and gas company, KazMunayGas has completed the first part of the second stage of seismic prospecting at the oil bearing South Zhambay-South Zaburunie located in the Kazakhstani sector of the Caspian Sea, the KMG press release read on the company's official web site.

The message read that over the last two years, seismic prospecting has been completed on 642 km of the sector.

The prospecting is being carried out in accordance with the product sharing agreement (PSA), concluded in December 2001 between Zhambay LLP and the Ministry of Energy and Mineral Resources of Kazakhstan. The minimum amount of work under the agreement includes seismic prospecting covering 1000 km and drilling one appraisal well.

The South Zhambay-South Zaburunie sector, with geological reserves forecasted to be over 600 million tonnes of standard fuel, is located in shallow waters of the coastal zone of the Northern Caspian Sea, 1.5 to 4 meters deep and a transit zone with water 0.2 to 1.5 meters deep.

Seismic prospecting in the South Zhambay-South Zaburunie sector started in July 2003. (Interfax-Kazakhstan)

***

Construction of the Borankol Gas Refinery in the Beyneu District of Mangystau Oblast will start soon, which is being developed by the oil company JSC Tolkynneftegas, the oblast Akim press service announced.

The project looks promising because the oblast has the potential to develop a chemical and petrochemical industry, and requires natural gas. In 2003, natural gas production grew in the oblast, which is due to the start of extraction from the Tolkyn and Borankol oil fields being developed by OJSC Tolkynneftegas and CJSC KazpolMunay. In 2003, Tolkynneftegas produced 490.4 million cubic meters and KazpolMunay produced 86.9 million cubic meters. During the first half of 2004, the two companies produced a total volume of 617.1 million cubic meters of gas.

The companies produce liquid propane, butane, and blends through refining 10 million cubic meters of natural gas extracted from the Borankol and Tolkyn deposits every day.

The project is being financed with USD 97 Million in credit from Narodniy Bank. The gas refinery will be completed in three years. The project will be fully underway by 2006, and 110 new jobs will be created. (Kazakhstan Today)

***

Gasprom could finance the expansion of the Central Asia-Center gas pipeline through RosUkrEnergo. Gasprom Deputy Chairman of the Board of Trustees, Alexandr Ryazanov announced that by April 2005 the final feasibility study of the USD 2 Billion project to create a new CAC branch, increasing its capacity by 30 billion cubic meters.

"The national joint stock company Naftogaz Ukrainy, which purchases Turkmen gas transported by the CAC, will evidently not find sufficient funds for a new gas pipeline," Mr. Ryazanov said.

"If we consider our other investment obligations, honestly, I doubt that financing the project will be expedient if it is entirely Gasprom's expense," Mr. Ryazanov said. "If this is the case, it would be logical to attract RosUkrEnergo, a JV created by Raiffeisen Bank and Gasprom Bank, to become the transit operator for Turkmen gas to Europe. They will fulfil Ukraine's need for gas and may assume credit and repay them from export revenues," he added.

Mr. Ryazanov noted that the construction of a new pipeline will be right after Gasprom receives survey data on gas reserves in Turkmenistan.

The CAC gas pipeline runs through Turkmenistan, Uzbekistan and Kazakhstan, and services supplies of Turkmen gas to Ukraine and Russia. According to the Ministry of Energy and Mineral Resources, gas transportation through the CAC by 2010 will be increased up to 75-90 billion cubic meters. If the capacity is to increase to 80 billion cubic meters, an investment of USD 2 Billion is required; up to 100 billion cubic meters requires an additional investment of USD 1.1 Billion. (Interfax-Kazakhstan & Kommersant newspaper)

Banking and Finance

The National Agency for the Regulation and Control of Financial Markets and Financial Organizations have defined three main criteria to determine an investor for Nauryz Bank on December 20, 2004, the Agency Director, Bolat Jamishev said.

Earlier, three Kazakhstani banks, Bank CenterCredit, ATF Bank and Alliance Bank submitted letters of interest in investment in Nauryz Bank. The representatives of these banks are members of the temporary administration during the freeze enacted at Nauryz Bank. Additional potential investors include the Kazakhstan Grain Union and the Moscow-based company, EAF ltd.

The criteria used to assess the investors' proposals are as follows: the effectiveness of measures to save Nauryz Bank from its complex financial situation; the amount of investment they propose for the Bank; the maintenance of the branch network; a proposal for profitable conditions for large depositors.

"13 large depositors at Nauryz Bank have USD 44 Million in deposits. If depositors decide to withdraw this amount, no investor will be able to cope", Jamishev believes. The optimal resolution of the situation is, "the merger of Nauryz Bank into the structure of a large Kazakhstan bank including the subsequent transfer of its entire branch network. (Kazakhstan Today)

***

The World Bank has approved a USD 35 Million loan for a Kazakhstani Second Agricultural Post-Privatisation Assistance Project. It will assist farmers and small and medium size rural enterprises to obtain access to commercial financial services, thus encouraging the broad development of agriculture and improving the lives of rural residents.

The total cost of the project is USD 96.1 M, and it includes several components. These are Rural Financial Advisory Services, Agricultural Risk Management, Price Risk Management, expansion of financial services available in rural areas, and the development of rural micro financing.

The project is the second stage of a 17 year adapted program loan for agriculture with 5-year payment respite for the principal. Since 1992, when Kazakhstan became a member of the World Bank, the bank's investments into the RK reached nearly USD 2 Billion spread over 23 different projects. (Kazakhstan Today)

***

Capital Partners under Kazkommertsbank will build the largest trade and business center in Moscow, for a cost of about USD 300 Million. The new multifunctional complex will have a total area of 311,950 square meters, and will be built near the Voikovskaya subway station at the Leningrad Thoroughfare and Staropetrovskiy Street crossing on the Moscow Radikon iron foundry territory.

This is the second Kazkommertsbank project of this size in Moscow. Capital Partners has confirmed that the company is working on the project which is located at the Voikovskaya station, but refused to give more details.

Currently, Capital Partners is building the Kazakhstan Bank Ritz Carlton Hotel on the territory of Intourist Hotel. Capital Partners was established in 2001 and has several housing and commercial estate projects in Kazakhstan, such as the construction of two Renaissance network hotels in Aktau and Atyrau. The company's turnover and owners have not been reported. (KazInform & Vedomosti)

***

The earnings on total investment assets for pension funds in Kazakhstan starting in 1998 remains positive. Bolat Jamishev, the chairman of the Agency on Regulation and Control Over Financial Organizations, said on Tuesday that negative earnings for pension funds, adjusted for inflation, only occurred this year. Last year, even considering the high level of inflation, pension fund assets maintained positive earnings.

After assessing the situation since the creation of the cumulative pension fund system, the total earnings is 149% against 66% inflation over the last 7 years.

"As a whole," Mr. Jamishev said, "Pension funds have a large reserve for stability." He referred to the experience of developing one of the most successful pension systems in Chile, where over 20 plus years there were three consecutive years with negative earnings, which did not stop the country from maintaining an overall high earnings. According to the Agency, the total assets in Kazakhstani pension funds are KZT 459 Billion. (KazInform)

Energy and Power

The Moody's Investors Service international rating agency has enhanced the long-term credit of the Kazakhstan Electricity Grid Operating Company JSC KEGOC to Baa3/positive, the KEGOC press service reported.

This was preceded by a detailed analysis of the production and financial conditions at the company over a number of years. The enhancement of credit to investment level evidences considerable improvements regarding KEGOC's solvency over the past years.

Moody's evaluates the close connection between KEGOC and the government in accordance with criteria applicable to organizations that receive government support and considers KEGOC to be a company participating in the realization of the state economic policy. During the decision-making process, the electrical grid operator's monopoly status was taken into account, as well as its active business strategy.

The Moody's Investors Service rating agency is one of the most respected and widely used sources in the world of credit ratings, analytical research and risk analysis, according to the KEGOC press service. (Golden Eagle Partners)

***

From January to November 2004, the JSC Ekibastuz GRES-2 sold 4.970 billion kilowatt/hour of electrical energy, which is 17% more compared to the same period last year (4.245 billion kilowatt/hour), the JSC press service reported.

There are two energy blocks operating at the station. According to a five-year agreement between RAO UES Russia and JSC Ekibastuz GRES-2, Russia opened its internal market for electrical energy from the Ekibastuz GRES-2 in January 2003. In 2003, the supplies of electrical energy to Russia were 3.437 billion kilowatt/hour. Electrical energy supplied to Russia is being carried out within the framework of a Kazakhstan-Russia JV based on GRES-2.

A third energy block will be built under the JV project. The first Ekibastuz GRES-2 energy block was launched in 1991; the second in 1993. The capacity of the plant is 1000 MW. The plant produces 10-12% of the total volume of electrical energy produced in Kazakhstan. (Kazakhstan Today)

***

Two windmills were launched in the South Kazakhstan Oblast that will generate electrical energy for Kentau, the JSC Ontustik Zharyk stated.

The official launching ceremony was postponed until the arrival of managers from the Indian Company, NEPC India Limited, since they provided the equipment for the windmills. However, they are already working as planned.

An agreement for the construction of two windmills, each with a 250-kilowatt capacity, was reached in early 2003 between JSC Turkestanenergo and NEPC India Limited. The Indian company initiated the agreement. NEPC India Limited provided the equipment for free. The Kazakhstani Company laid the electrical network for connecting the windmills to the city's power station.

The construction in Kentau is a pilot project. If producing electrical energy by wind proves to be profitable, a few more windmills will be constructed. The project will pay off in 5 years. (Kazakhstan Today)

Metals and Mining

A zinc bed has been discovered in the vicinity of Lisakovsk city in the Kostanay Oblast, and will be developed by KazZinc. Geological exploration and analyses conducted demonstrate that the zinc content in the ore is rather high, and totals an average of 20%.

It is planned to ship the finished ore to the west of Kazakhstan, where KazZinc processing facilities are located. However it is still unknown when the commissioning of the equipment and stripping operations will begin. According to preliminary assessments, the cost of this project could reach USD 40 Million. (KazInform)

***

According to experts, Jambyl gold reserves have been estimated at 300-350 tonnes. The Akbakay gold deposit in the Moyinkum region in the Jambyl Oblast, which was discovered 35 years ago, contains significant gold reserves.

According to the Department of Industry, Transport and Energy within the Jambyl Oblast Akim administration, the Akbakay Mining and Enrichment Plant OJSC includes the underground mine Akbakay, an open-pit for gold-containing ore production, an ore enrichment plant with a 220,000 tonnes annual capacity, and electric-metallurgical workshop, and also the Dore-Dubek plant for processing gold-containing concentrate.

During its first six months, the Akbakay Mining and Enrichment Plant, with an annual capacity of 250,000 tonnes of processed ore, produced 602 kg of gold and 98 kg of silver, and paid KZT 183.5 Million in taxes. The Akbakay MEP was given the honoured title, "The best industrial enterprise taxpayer". ­(KazInform)

***

The Donskoy Mining and Enrichment Plant (MEP) plans to manufacture 700,000 tonnes of burnt pellets annually. The operation is planned for launch during the fourth quarter of 2005; the cost of the construction is USD 44 Million.

Alexander Mashkevich, the President of the Eurasian Industrial Association (EIA) said on Friday at the 12th meeting of the Foreign Investors Council in Astana that EIA specialists are also working jointly with the Kazakhstani National Atomic Company, Kazatomprom on obtaining products for processing zirconium concentrates, the value of which will exceed the cost of the feedstock by 12 times, at Kazatomprom operational capacities.

Along with this he said, "SSMEP is considering constructing a plant in Kazakhstan that will produce metal pellets worth USD 600 Million."

In the meantime, "one project that has been given priority with Alyuminiy Kazakhstana JSC is the development of technology for non-standard bauxites production," according to Mr. Mashkevich. He also said, "Producing sand alumina that meets international standards is a problem and is now being solved."

All of the enterprises mentioned above, along with the JSC Eurasian Energy Corporation and JSC Shubarkol Komir coal pit are included in the EIA. (Interfax-Kazakhstan)

***

The Aktau Casting Plant LLP (ACP) has concluded a contract for the supply of a modular casting shop with the Pakistani Ravi Steel Company, the oblast akim press-service reported.

The plant will be commissioned in May of 2005. A USD 5.1 Million loan from Narodniy Bank of Kazakhstan will be used. The plant plans to produce up to 200 tonnes of steel bars per day using ferrous scrap metal. In the future, after the second line of the plant is built, it will manufacture metal sections with various configurations.

Preparation for necessary engineering and a utilities network has begun. Outside water and energy supply networks for the newly designed plant have been completed. The site has been covered in asphalt with a reinforced concrete fence and is ready for the assembly of the plant. (Kazakhstan Today)

Transport and Telecommunications

A rapid technological leap was recently made in the development of the telecom network in the Atyrau Oblast. The Oblast Directory of Telecommunications has reported that the replacement of outdated and physically depreciated switching stations (ATS) has been completed. In Atyrau, the analog exchange ATS-22 was replaced by an ATS-32 digital exchange that brings with it an expansion of up to 10,000 numbers capacity. A digital exchange with extension of the capacity of up to 256 numbers has replaced a crossbar office in the Chkalovo village.

The digitalisation rate in the Oblast at the beginning of 2003 totalled 71%, but in Atyrau it was only 53%. Currently, 87 digital exchanges with a total capacity of 80,803 numbers operate in Atyrau and the Oblast. The total number of main telephone sets in the regions totals 65,248 units, and this number includes 12,603 units in rural areas. 13 DAMA satellite communication stations are installed in the network. The telephone density per 100 residents totals 15 telephones.

The volume of capital investment in the modernization and development of the telecom network in the Atyrau Oblast over the last two years totalled KZT 1.5 Billion. (KazInform)

***

"If the metro in Almaty continues to be constructed at its current pace, the project will take no less than four years to complete," OJSC Almatymetrokurylys Director General Murat Ukshebaev said at a news conference on Tuesday.

The news conference was held following a ceremony that celebrated the completion of a tunnel between the Zhibek Zholy station on the corner of Gogol and Furmanov streets, and Almaly station on the corner of Bogenbai Batyr and Furmanov streets. Construction on this particular section began in February 1994. One kilometer has been finished during the 11 years the project has been underway due to problems with financing.

A third connection between stations has been completed this year.

Two kilometers of tunnels should be built in 2005. "If financing remains stable, the tunnels will be completed in two years," Mr. Ukshebaev said.

According to Ukshebaev, OJSC Almatymetrokurylys used KZT 1.809 Million this year. "Next year we plan to use KZT12 Billion. However, so far only KZT 5.28 Billion has been allocated from the national budget," he said.

With a current population of 1.3 Million, Almaty began constructing the metro in 1988. The first 8.3 km of the metro is being constructed with a total of seven stations from the corner of Raimbek and Furmanov streets to the corner of Abai and Zharokov.

"Meanwhile, the general plan for the development of Almaty, approved in 2002, outlines the construction of three metro lines having a total length of 45 km," Mr. Ukshebaev stated. (Interfax-Kazakhstan)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 28 December 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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