KAZAKHSTAN OFFICIAL OUTLINES DISPOSITION OF

C O N F I D E N T I A L ALMATY 003296

SIPDIS


DEPT FOR EB/ESC; EUR/SNEC (MANN); EUR/CACEN (MUDGE)

E.O. 12958: DECL: 09/11/2015
TAGS: ENRG EPET IN KZ ECONOMIC
SUBJECT: KAZAKHSTAN OFFICIAL OUTLINES DISPOSITION OF
PETROKAZAKHSTAN ASSETS

REF: A. ALMATY 3075

B. ALMATY 3143

Classified By: POEC CHIEF DEBORAH MENNUTI REASONS 1.4(B) and (D)


1. (C) Summary: A well-placed source in the state-owned oil
company, KazMunaiGas (KMG),recently told Econoff that KMG
would exercise its pre-emptive rights to purchase parts of
PetroKazakhstan (PK) once the Canadian company's sale to the
PetroChina was approved by PK shareholders (reftels).
According to this plan, KMG would purchase the Shymkent
refinery and PK's share of the Kazgermunai joint-venture
(JV); LUKOIL would end up with PK's North Kumkol field; and
the Chinese CNPC-SINOPEC JV would retain PK's biggest
producer, the South Kumkol field. End Summary.


2. (C) In a September 8 meeting with Econoff, Sabr S.
Yessimbekov (strictly protect),Executive Director of the
Transportation Infrastructure division of KMG, outlined his
expectations of the ultimate disposition of PetroKazakhstan's
(PK) assets. Yessimbekov indicated that, once PK's sale to
"PetroChina" was approved by shareholders in mid-October,
the GOK would use its pre-emptive rights to purchase parts of
PK, notably the Shymkent refinery. The Chinese, he noted,
had asked that the refinery be owned in thirds by KMG, CNPC,
and SINOPEC, but KMG "would take it all."


3. (C) KMG would also take over PK's interest in the
"Kazgermunai" fields, previously a 50-percent PK joint
venture (JV) with Germany's RWE-DEA AG (25%),Erdol-Erdgas
Gommern (17.5%) and the International Finance Corporation
(7.5%). (Note: A western oilman who looked at Kazgermunai
said the field is "a gem" and could operate at about
60-70,000 bpd, up from its present 46,000. End Note) LUKOIL
would purchase its PK partner's 50% share in the JV "Turgai
Petroleum." Finally, CNPC and SINOPEC would keep PK's
biggest producer, the South Kumkol field, previously
wholly-owned by the Canadian company.


4. (C) Yessimbekov predicted that there would be no public
announcement of the planned KMG purchase of PK assets until
after PK shareholders had voted on the sale of the company to
PetroChina. The announcement might be delayed further after
that, while KMG "negotiated the details with the Chinese."
(Note: The biggest detail, presumably, would be price. On
September 12 Interfax-Kazakhstan quoted an unnamed high
government official as suggesting that "(buying) even a small
block of shares in PetroKazakhstan would mean us having to
mobilize considerable funds quickly, otherwise we'd have to
seek significant price concessions from CNPC based on mutual
strategic cooperation." End Note.)


5. (C) Comment: This division of PK's assets would make
sense, given the actors' economic interests and past
politics. Many analysts believe that LUKOIL cooperated with
the GOK in launching legal actions against PK to soften the
latter's stock price for takeover; Turgai Petroleum's North
Kumkol field would be the logical payoff. KMG would get PK's
refinery, which the GOK has reportedly long regretted
selling. The Chinese, of course, would be left with PK's
biggest producer, the South Kumkol field, conveniently
located near the Atasu-Alashankou pipeline. End Comment.
ORDWAY


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