KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS ALMATY 003172

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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE
August 7 - August 20, 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.

-- Changes in the Cabinet
-- WTO Protocol with Turkey Signed
-- China Bank of Kazakhstan Lost License
-- Economic Statistics
-- CNPC International to Buy PetroKazakhstan
-- TCO Executives Sued for Environmental Damage
-- GoK to Review North Caspian PSA
-- Kazakhstan Bans Aviation Fuel Export Through 2005
-- Oil & Gas Statistics


Changes in the Cabinet
--------------


2. Serik Umbetov was discharged from his position of
Minister of Agriculture and appointed as Akim of Almaty
Oblast (not Almaty city) by a presidential decree. Shalbay
Kulmakhanov, who had held the position of Akim of Almaty
Oblast, was appointed as Minister for Emergency Situations.
Mukhambet Kopey was dismissed from the position of Minister
for Emergency Situations by the President's decree in
connection with a new, as yet unspecified, appointment.
(Panorama, August 12)

WTO Protocol with Turkey Signed
--------------


3. Kazakhstan and Turkey signed a protocol on completion
of the bilateral negotiations for access to Kazakhstan
market on mutually acceptable terms. According to the
press service of the GOK, "the parties negotiated the
levels of Kazakhstan's import customs duties for Turkish
commodities and obligations regarding Turkey's access to
the Kazakh services market, in line with the WTO
agreements." Completion of the negotiations will promote
Kazakhstan's early admission to the WTO. (Interfax -
Kazakhstan, August 15)

China Bank of Kazakhstan Lost License
--------------


4. According to Yelena Bakhmutova, Deputy Chairman of the
Financial Supervision Agency (FSA),the license for transfer
operations will be withdrawn from China Bank of Kazakhstan
JSC (a subsidiary of the Bank of China) for six months. As
Bakhmutova explained, the FSA uncovered violations connected
with money transfers: individuals sent money to China from
accounts not belonging to them. "After investigation of the
incident the bank is going to take steps to prevent such
situations in the future," she added. (Interfax -
Kazakhstan, August 16)

Economic Statistics
--------------


5. The net profit of the Aktau International Seaport was
KZT 677,475,000 (approximately $5 million) for the first
half of 2005, versus KZT 985,080,000 (about $7.2 million)
for H1 2004. Revenues from sales of goods, works, and
services totaled KZT 2,158 million in January-June 2005
(approximately $16 million) versus KZT 2,028 million (about
$15 million) in H1 2004. As reported, Aktau Seaport
transshipped a total of 5,294,031 tons of freight in January-
June 2005, including by ferries, compared to 4,959,329 tons
during H1 2004. (Interfax - Kazakhstan, August 8)


6. In July 2005, the volume of foreign currency traded by
the population via exchange points in Kazakhstan was KZT 115
billion (approximately $848 million),according to the press
service of the National Bank of Kazakhstan. The most
significant trade was in U.S. dollars: $730 million; about
half of this amount ($384 million) was bought at exchange
points in Almaty. The Euro volume traded in July was Euro
65 million. Almaty residents bought Euro 44 million or 67%
of the total amount. (Kazakhstan Today, August 17).


7. The average cost per square meter of housing in
Almaty for the month of July is $1,178.30, according to real
estate experts. They evaluate the housing market for July
as stable in general, despite "the significant shifts in
housing prices for expensive apartments." Prices for elite
apartments in newly constructed buildings increased in July
by 12-18%. (Golden Eagle Service, August 18)

CNPC International to Buy PetroKazakhstan
--------------


8. On August 22, CNPC International, a subsidiary of China
National Petroleum Corporation (CNPC),agreed to pay $4.18
billion, or $55 per share, for Canadian firm PetroKazakhstan
(PK). PK's Board of Directors has recommended that its
shareholders accept CNPCI's offer, which is subject to the
approval by 66.6% of them at an October meeting. Goldman
Sachs International is acting as financial advisor to PK.
The agreement contains customary provisions prohibiting PK
from soliciting any other acquisition proposal, but allows
the PK Board of Directors to accept and recommend a superior
proposal if it is required to do so to avoid breaching its
fiduciary duties and upon payment of a termination fee of
$125 million. Under the Agreement, CNPCI has the right to
match any such superior proposal. Indian Oil & Natural Gas
Corp. is reportedly now evaluating the possibility of
submitting a counter offer. (Reuters, August 23)

TCO Executives Sued for Environmental Damage
--------------


9. Atyrau's Environmental Protection Procuracy has
initiated criminal proceedings against TengizChevrOil (TCO)
executives for "violation of environmental standards in
economic and other activities" and "for air pollution
damaging human health," a representative of the Procuracy
announced on August 8. The criminal case is related to
failure of Tengiz gas-processing plant on July 2, which
caused acid and crude gas leak in the amount of 49,910 tons.
The damage is assessed at KZT 199.7 million ($1.5 million).
Documents have been submitted to Atyrau Oblast Prosecutor's
Office to verify the appropriateness of criminal charges.
(Kazakhstan today, August 11)

GoK to Review North Caspian PSA
--------------


10. According to an August 13 Decree by the Prime Minister,
the GoK has established a working group under Vice-Minister
of Finance Uzbekov to review provisions of the Production
Sharing Agreement (PSA) for the North Caspian Sea (Kashagan)
signed on November 18, 1997 with OKIOC (currently - Agip
KCO). The working group will review the application of
separate issues of Kazakhstani tax and customs legislation
to the Kashagan PSA. (Prime-Minister Decree #222-p, August
18)

Kazakhstan Bans Aviation Fuel Export Through 2005
-------------- --------------


11. Kazakhstan imposed a temporary ban on aviation fuel
export from August 20 through December 31, 2005, according
to an August 19 decree by the Prime Minister. The ban is
imposed "for the purpose of saving the required aviation
fuel for economic needs of the Republic." The ban does not
apply to aviation fuel registered earlier in accordance with
regular declaration before enactment of the decree, and also
placed under special customs regime. (Interfax -
Kazakhstan, August 22)

Oil & Gas Statistics
--------------


12. In January-July oil production in Kazakhstan was 28.9
million tons, 1% higher compared to the same period in 2004,
the National Statistics Agency reported. During the same
period, 6.8 million tons of gas condensate, up 44% year-on-
year, were produced. (Interfax - Kazakhstan, August 15)


13. In H1 2005 Kazakhstan exported 28.1 million tons of oil
and gas condensate, 12.1% higher compared to the same period
in 2004. In dollar terms, the exports totaled $8.1 billion,
a 78% increase. (Interfax - Kazakhstan, August 15)

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