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Identifier
Created
Classification
Origin
05ALMATY4426
2005-12-16 11:40:00
UNCLASSIFIED
US Office Almaty
Cable title:  

KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

Tags:   ECON  EIND  ENRG  EPET  EFIN  KZ  ECONOMIC 
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						UNCLAS  ALMATY 004426 

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
November 27 - December 10, 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.

-- Republican Budget for 2006 Signed
-- National Fund to be Modified
-- Growth of Russian-Kazakhstani Bilateral Trade
-- Sberbank to Buy Kazakhstan's Texakabank
-- Lukoil Completes Acquisition of Nelson Resources
-- Ukrtransnafta, KazMunayGaz Set up Joint-Venture
-- Parliamentarians Make Accusations against KazMunayGaz
-- Oil & Gas Statistics

Republican Budget for 2006 Signed


--------------------------





2. President Nazarbayev signed the law "On the Republican
Budget for 2006". The revenue part of the 2006 budget
stands at KZT 1,491.8 billion (approximately $11.1 billion);
the expenditures at KZT 1,605.6 billion (about $11.97
billion); and the deficit at KZT 113.8 billion (about $850
million), 1.4 % of GDP. The GoK called this budget
"socially oriented", since social expenditures comprised KZT
611.6 billion (about $4.56 billion), or about 40% of total
budget expenditures. (Interfax - Kazakhstan, November 26)

National Fund to be Modified


--------------------------





3. The GoK plans to implement a new model for the National
Fund in 2006. "In accordance with the President's
instruction, the transfer to the new model for the National
Fund is planned to occur on July 1, 2006, rather than
January 1, 2007. It will require some budgetary changes.
Moreover, additional transfers to the budget might be
anticipated," the Minister of Economy and Budget Planning
Kairat Kelimbetov said in Astana on December 6. (Interfax -
Kazakhstan, December 7)

Growth of Russian-Kazakhstani Bilateral Trade


--------------------------





4. On November 25, Russian Prime Minister Fradkov announced
that 2005 goods turnover between Russia and Kazakhstan will
be approximately $10 billion. He emphasized the dynamic
development of bilateral trade relations: in 2004 commodity
turnover reached $8 billion, up 50% compared to 2003, and $7
billion in September 2005, up 20% compared to the same
period 2004. (SKRIN Agency, November 25)

Sberbank to Buy Kazakhstan's Texakabank


--------------------------





5. The Financial Supervision Agency permitted Russian
Sberbank to purchase 100% of Texakabank. Texakabank is the
15th biggest financial institution in Kazakhstan, with total
equity capital of $18 million and $170 million in assets.
Two shareholders privately own Texakabank; one of them holds

a 90.3% stake. According to Russian financial specialists,
Sberbank's intention to enter the Kazakhstani market is not
surprising and is explained by its need to service corporate
client operations within the CIS. This acquisition will
strengthen the position of Sberbank in the domestic Russian
market. (RIA Novosty, December 7)

Lukoil Completes Acquisition of Nelson Resources


--------------------------

---



6. On December 6 Lukoil Overseas Holding Ltd. (Lukoil)
announced that "all the requisite precedent procedures and
conditions, including shareholder approval and Kazakhstan
governmental approval, have been fulfilled, and the
acquisition of Nelson Resources Limited (Nelson) has been
completed." Nelson merged with Caspian Investments
Resources Ltd., Lukoil subsidiary. Nelson's shareholders

received $2.19162 per share. Lukoil has assumed full
management control over Nelson's projects: Kazakhoil-Aktobe,
North Buzachi, KarakudukMunay, Arman, and options to acquire
two exploration blocks in Kazakhstani sector of the Caspian
Sea. (Interfax - Kazakhstan, December 8)

Ukrtransnafta, KazMunayGaz Set up Joint-Venture


--------------------------

--



7. Ukraine's Antimonopoly Committee allowed Ukrtransnafta
(Ukraine) and KMG Trading House, a subsidiary of
Kazakhstan's national oil producer KazMunayGaz, to set up a
joint venture TransMunay. TransMunay will begin
construction of a 52-kilometer pipeline to join the Yuzhny
oil terminal in Odessa and the Transdnepr system of oil
pipelines in early 2006. The JV was established based on
the mutual interest of Ukraine and Kazakhstan to increase
oil transportation through the Odessa-Brody pipeline system.
(Interfax - Kazakhstan, December 10)

Parliamentarians Make Accusations against KazMunayGaz


--------------------------



--------------------------





8. On December 7 a group of Kazakhstani parliamentarians
asked regulatory agencies to audit national oil and gas
company KazMunayGaz (KMG). Deputies voiced concerns about
KMG's high administrative expenses ($227 million), including
$84 million in management fees. Additionally, deputies are
surprised by the way KMG disposes of royalties paid by
subsoil users in non-cash remuneration. (Interfax -
Kazakhstan, December 8)



9. In its December 10 response, KMG claimed the deputies
used false information. Specifically, $84 million was paid
by KMG Exploration and Production, a KMG subsidiary, for
management services from KMG. Further, oil delivered by
subsurface users as a royalty is managed not by KMG, but by
the State. According to KMG, the deputies' request damaged
KMG's reputation and the company has a right to take legal
action. (Kazakhstan Today, December 10).

Oil & Gas Statistics


--------------------------





10. In January-November oil production in Kazakhstan was
46.5 million tons, 0.7% higher compared to the same period
in 2004, the National Statistics Agency reported. During
the same period, 9.8 million tons of gas condensate were
produced, up 25.4% year-on-year. The production of natural
gas totaled 13.3 billion cubic meters, a 29% increase.
(Interfax - Kazakhstan, December 13)

ORDWAY


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