KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS ALMATY 002950

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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE
July 24 - August 6, 2005



1. Summary: This information is drawn primarily from the
Kazakhstani local press, and has not been checked for
accuracy. The opinions and policies expressed in this
report are those of the authors, not the U.S. Government.

-- Special Economic Zone in South Kazakhstan
-- Kazakhstan Cuts Poverty Level
-- GoK to Change Currency Exchange Policy
-- First Issue of Infrastructure Bonds
-- New Representative for Caspian Sea Status
Negotiations Appointed
-- MOU on EITI Joining Drafted
-- First Exploration Well at Tub-Karagan Block Abandoned
-- New Oil Deposit in Western Kazakhstan Discovered
-- Kazakhstan Needs $7.5 Billion in Petrochemical Industry
Investment


Special Economic Zone in South Kazakhstan
--------------


2. According to Prime Minister Akhmetov, the GoK will
allocate KZT 841 million (approximately $6.2 million) to
construct infrastructure facilities in the "Ontustik"
special economic zone for the development of the cotton-
textile cluster in South Kazakhstan Oblast. It is planned
to set up large and medium textile plants and attract new
technologies, expanding the range of cotton processing, to
improve product quality and labor productivity. (Interfax-
Kazakhstan, July 27)

Kazakhstan Cuts Poverty Level
--------------


3. The part of the population with income below the
subsistence line was 15.3% in Q1 2005 versus 19.1% in
January-March 2004, the National Statistics Agency reported.
Currently, the population of Kazakhstan exceeds 15.1
million. In rural areas the poor accounted for 23.9%; this
is almost three times as much as in urban areas, where the
figure is 8.4%. The subsistence line was increased by 8.3%
in Q1 2005 compared to the same period of last year, and is
now set at KZT 5,841 (approximately $43). (Interfax -
Kazakhstan, 27 July)

GoK to Change Currency Exchange Policy
--------------


4. "In the medium term, it is possible that we will set
limits for the fluctuation of the real exchange rate and
inflation," Prime Minister Akhmetov said during a government
meeting. The huge inflow of petrodollars caused the
appreciation of the tenge, and as a result made local
manufacturers less competitive. In 2004, the tenge
appreciated 15% against the US dollar and 7% against the
Euro. "Guaranteeing the competitiveness and stability of
the real exchange rate has to be one of the main principles
of the country's development strategy," Akhmetov concluded.
(Dow Jones International News, 27 July)

First Issue of Infrastructure Bonds
--------------


5. The Financial Supervision Agency (FSA) registered the
first issue of infrastructure bonds for KZT 30 billion
(approximately $220.6 million). The bonds are issued for
construction of a new railway connecting Shar and Ust-
Kamenogorsk, the representative of state-owned Kazakhstan
Investment Fund (KIF) said. The concessionary company
Doszhan Temir Zholy is the issuer of the new securities.
The bonds' maturity (KZT 1,000 each paper (about $7.4)) is
in 23 years; the railway construction is planned for three
and a half years. KIF hopes that pension funds and
commercial banks will be the main purchasers of the bonds.
(Interfax-Kazakhstan, July 29)

New Representative for Caspian Sea Status Negotiations
Appointed
-------------- --------------


6. Ambassador-at-Large Yerik Utembaev was appointed as the
new representative of Kazakhstan to the Caspian Sea status
negotiations, according to a Presidential Decree from July

27. Earlier, Utembaev, age 39, served as Deputy Secretary
of Kazakhstan's Security Council and Deputy Chair of the
Agency for Strategic Planning. (Interfax - Kazakhstan,
August 1)

MOU on EITI Joining Drafted
--------------


7. The GoK has drafted a Memorandum of Understanding (MOU)
on Kazakhstan's accession to the Extractive Industry
Transparency Initiative (EITI),Kazakhstani Energy Minister
Shkolnik informed on July 29. Thirteen mining companies and
forty-nine oil and gas companies were listed in the MOU,
although membership is voluntary. The MOU is expected to be
signed in September during the KIOGE oil and gas exhibition.
(Interfax - Kazakhstan, August 1)

First Exploration Well at Tub-Karagan Block Abandoned
-------------- --------------


8. On August 2, Lukoil abandoned its first exploration
well at the Tub-Karagan block (central part of Kazakhstani
sector of the Caspian Sea). No oil or gas bearing reserves
of commercial value were found. Tub-Karagan shareholders
are Lukoil Overseas (50%) and KazMunayTeniz, offshore
subsidiary of the national oil producer KazMunayGaz, (50%).
All costs incurred during the exploration period are to be
paid by the Russian party. (Lukoil Overseas press-release,
August 2)

New Oil Deposit in Western Kazakhstan Discovered
-------------- ---


9. CNPC-Aktobemunaygaz, a subsidiary of Chinese National
Petroleum Corporation (CNPC) in Kazakhstan, discovered an
oil deposit in the central block of eastern part of the
Caspian depression (Aktobe Oblast),the company's General
Director Jian Chi informed on July 29. The deposit was
named "Umit" ("Hope") and has reserves of about 70-75
million barrels of oil. (Interfax - Kazakhstan, August 1)

Kazakhstan Needs $7.5 bn in Investments in Petrochemical
Industry
-------------- --------------


10. A study conducted by the Economics Ministry with the
aid of the Nexant consulting company (USA) called for $7.5
billion in investments in the petrochemical industry during
the next fifteen years. (Interfax - Kazakhstan, August 1)

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