KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS ALMATY 002950 SIPDIS DEPT PASS TO EUR/CACEN MUDGE DEPT PASS TO OPIC - BALLINGER DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER DEPT PASS TO AID - EE-PHILLIPS/RUSHING TREASURY FOR OASIA/VELTRI USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS USDOC FOR 6110/ITA/TD/BI/RHALPERN ANKARA FOR CFC 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) ASQUINO NNNN