KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS SECTION 01 OF 03 ALMATY 000324 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 January 8 - 21, 2006 ¶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. -- New Inter-State Bank in Russia and Kazakhstan -- EBRD is Among the Largest Investors in Kazakhstan -- Almaty to Become the Regional Financial Center -- Economic Statistics -- Georgia Hopes Kazakhstan Connects to BTC Soon -- KazTransGaz to Increase CAC Gas Pipeline Capacity -- KazTransGaz to Acquire Kyrgyz Gas Company -- Oil Production in Kazakhstan in 2005 -- Gas Production in Kazakhstan in 2005 -- Oil Refining in Kazakhstan in 2005 New Inter-State Bank in Russia and Kazakhstan -------------- ¶2. Russia and Kazakhstan have reached an agreement on the establishment of the Eurasian Development Bank (EDB). The charter capital of the EDB will total $1.5 billion, including $1 billion as Russia's share (2/3 of votes) and $500 million as Kazakhstan's contribution (1/3 of votes). The bank is released from paying duties and taxes and granted immunity from search, arrest, confiscation or any other form of withdrawal. The bank's goal is to maintain high rates of economic growth, enlarge mutual trade, and stimulate direct investments in both countries. (Interfax - Kazakhstan, January 12) EBRD is Among the Largest Investors in Kazakhstan -------------- -------------- ¶3. The European Bank for Reconstruction and Development (EBRD) funded $343 million worth projects in Kazakhstan in 2005, up 25% from 2004. As Andr Kuusvek, EBRD Director for Kazakhstan said at the presentation of the report on economic development in CIS countries in 2005, "EBRD's project funding in Kazakhstan comprised over 80% of the bank's total operations in Central Asia." According to Kuusvek, in 13 years of EBRD activity the bank has funded about 80 projects worth $1.5 billion, allowing the bank to say that EBRD is the "largest investor in the country after oil and gas companies." (Interfax - Kazakhstan, January 17) Almaty to Become the Regional Financial Center -------------- - ¶4. Economy and Budget Planning Vice-Minister Batyrkhan Isaev presented a draft of the Law on the Almaty Regional Financial Center. According to the draft, the Regional Financial Center is supposed to have a special legal regime, which will be extended to all registered legal entities which base their headquarters in Almaty. The 2006 budget earmarks KZT 1.5 billion (about $11.25 million) for the implementation of this project. (Interfax - Kazakhstan, January 18) Economic Statistics -------------- ¶5. "In 2005 Russian-Kazakh cooperation grew. The two countries strengthened economic ties: early reports indicate that trade turnover in 2005 exceeded $9 billion. Cooperation was dynamic and forward-going in other spheres as well," Russian Foreign Ministry spokesman Mikhail Kamynin said on January 9 in Moscow. (Interfax - Kazakhstan, January 9) ¶6. Trade turnover between Kazakhstan and China in 2005 may exceed $6 billion, President Nazarbayev said at talks with Chinese Vice President Zeng Qinghong. Nazarbayev believes that trade between the two countries will exceed the $10 billion mark in the near future. (ITAR-TASS World, 10 January 2006) ¶7. As Irbis agency reported, the total value of year 2005 transactions at the Kazakhstan Stock Exchange (KASE) is estimated at KZT 10,696.4 billion (about $80.5 billion),up 34.5% from 2004. In 2005 trading in non-state securities totaled KZT 367.8 billion (about $2.8 billion),a 1.5-fold increase. Meanwhile, the total value of state securities in 2005 stood at KZT 631.8 billion (approximately $4.8 billion),a drop of 16.1% from 2004. Currency transactions at the KASE last year totaled $12,044.1 million, a 27.5% increase from 2004. (Interfax - Kazakhstan, January 9) Georgia Hopes Kazakhstan Connects to BTC Soon -------------- ¶8. During her official visit to Kazakhstan on January 19- 21, the Speaker of the Georgian Parliament Nino Burdjanadze expressed hope that Kazakhstan will join the Baku-Tbilisi- Ceyhan (BTC) oil pipeline soon. According to the Speaker, Georgia hopes that Kazakhstan will become involved in gas transportation projects as well. Kazakhstan confirmed its intention to join BTC and to sign a corresponding agreement soon. An intergovernmental agreement for the transport of Kazakhstani oil by means of the BTC is currently being negotiated between Kazakhstan and Azerbaijan. This agreement envisions the construction of additional infrastructure between Aktau and Baku in order to carry Kazakhstani oil to Baku and the BTC. In the project's initial stage, 7.5 million tons of Kazakhstani oil will be transported through the BTC, with a subsequent increase to 20 million tons. (Interfax - Kazakhstan, January 20) KazTransGaz to Increase Central Asia-Center Capacity -------------- -------------- ¶9. Kazakhstan's state gas transport company KazTransGaz (KTG) plans to increase the capacity of the Central Asia- Center (CAC) pipeline to 55 billion cubic meters (bcm) per year in 2007, Intergas-Central Asia Director General Berlibayev said on January 18. In 2006 the company plans to launch a number of major investment projects for that purpose. According to Berlibaev, KTG plans to use 2006 profits to fund the project. In 2005, the CAC transported 45 bcm of gas from Uzbekistan and Turkmenistan. In 2006, KTG will transport 52 bcm of gas by CAC, in order to satisfy contracts with Russia's Gazprom. (Interfax - Kazakhstan, January 18) KazTransGaz to Acquire Kyrgyz Gas Company -------------- ¶10. KazTransGaz (KTG) is engaged in talks to acquire assets of the Kyrgyz gas company KyrgyzGaz (KG),KG Director General Zhusupov announced. According to KTG Director Sultangaliev, KTG would acquire KG assets as payment for the $18 million KG owes for Kazakhstani gas shipments. KTG and KG (82% state-owned) already cooperate in a joint venture, KyrKazGaz. KTG is reportedly interested in purchasing the Bishkek and Chu gas networks. (Interfax - Kazakhstan, January 19) Oil Production in Kazakhstan in 2005 -------------- ¶11. In 2005, oil and gas condensate production in Kazakhstan reached 61.5 million tons, 4% higher than in 2004, according to GOK preliminary figures. National oil and gas company KazMunayGaz (KMG) produced 9.4 million tons of oil and condensate in 2005 (up 5.3% from 2004). Enterprises with KMG participation produced 15.4 million tons of oil in 2005 (up 0.6%). TengizChevrOil produced the largest share, 13.6 million tons (down 0.7%). Other oil companies produced 36.7 million tons of oil last year (up 4.8%): Karachaganak Petroleum Operating - 10.3 million tons (up 21%),CNPC-Aktobemunaygaz - 5.8 million tons (up 8.6%), MangistauMunayGaz - 5.7 million tons (up 7.7%), PetroKazakhstan Kumkol Resources - 3.1 million tons (down 30%),Turgai Petroleum - 3 million tons (down 13%), KazGerMunay - 1.9 million tons (down 12.8%). (Interfax - Kazakhstan, January 16) Gas Production in Kazakhstan in 2005 -------------- ¶12. In 2005 according to GOK statistics, Kazakhstan produced 26 billion cubic meters (bcm) of gas and gas liquids, 27% higher than in 2004, including 14 bcm of natural gas. KazMunayGaz (KMG) produced 1.5 bcm of gas last year, up 9.4% year-on-year. Enterprises with KMG participation produced 7.7 bcm of gas last year (up 52.2%), including TengizChevrOil with 7.2 bcm (up 50%). Other companies produced 16.7 bcm of gas (up 19%),with Karachaganak Petroleum Operating producing 11.5 bcm (up 26.1%),and CNPC-Aktobemunaygaz producing 2.6 billion bcm (up 17.7%). (Interfax - Kazakhstan, January 16) Oil Refining in Kazakhstan in 2005 -------------- ¶13. In 2005, 11.2 million tons of oil were refined in Kazakhstan, 18.7% higher than 2004, the GOK reported. The Shymkent refinery produced 4.0 million tons of refined products (up 12%),Pavlodar refinery - 3.7 million tons (up 24%),and the Atyrau refinery - 3.5 million tons (up 21%). Gasoline production was 2.4 million tons in 2005, 23% higher compared to 2004. Kazakhstan also produced 3.3 million tons of diesel fuel (up 18%),234,000 tons of aviation kerosene (down 20%),3.6 million tons of fuel oil (up 43%) and 1.3 million tons of liquefied gas (up 2%). (Interfax - Kazakhstan, January 16) ORDWAY