KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS ALMATY 000004

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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE
December 11 - December 24, 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.

-- Parliament Approves Amendments to Comply with WTO Rules
-- Foreign Banks Welcome in Kazakhstan after WTO Accession
-- Almaty Hotel Sold by KazTransGaz
-- Kazakhstan to Produce 63 Million Tons of Oil in 2006
-- Kazakhstan Commissions Atasu-Alashankou Pipeline
-- KMG, Shell & Oman Pearls Sign PSA
-- Ex Vice-President of KMG to Head KazEnergy Association
-- PetroKazakhstan Wins One Case; Another Advances

Parliament Approves Amendments to Comply with WTO Rules
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2. Parliament passed a series of amendments to legislation
on subsidies, compensation, and anti-dumping measures. The
amendments are intended to bring the law on subsidies and
compensatory measures into compliance with the World Trade
Organization (WTO) agreement on subsidies and compensatory
measures, and to match the law on anti-dumping measures with
the WTO Agreement on Implementation of Article 6 of the
General Agreement on Tariffs and Trade 1994. The bill will
now be forwarded to the President for endorsement.
(Interfax - Kazakhstan, December 21)

Foreign Banks Welcome in Kazakhstan after WTO Accession
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3. After Kazakhstan joins the WTO, the Financial
Supervision Agency (FSA) will not object to granting foreign
banks the right to open branches in Kazakhstan. However,
according to FSA Chair Zhamishev, the FSA plans to establish
asset limitations in order to ensure equal competition in
the banking market. The FSA will also require branches of
foreign banks to maintain reserve deposits with the National
Bank of Kazakhstan in proportion to their assets. (Interfax
- Kazakhstan, December 21)

Almaty Hotel Sold by KazTransGaz
--------------


4. On December 22 Kazakhstani company BNA Development won
the auction held by KazTransGaz (KTG),KazMunayGaz's
subsidiary, to acquire the "Almaty" hotel and property for
$17.2 million. The auction for the "Kazakhstan" hotel
failed. The two hotels were transferred to KTG for public
sale as part of KTG's Summer 2005 acquisition, at the
government's initiative, of the Almaty Power Consolidated
(APC) company. (Interfax - Kazakhstan, December 22)

Kazakhstan to Produce 63 Million Tons of Oil in 2006
-------------- --------------


5. Kazakhstan plans to produce 63 million tons of oil in
2006, Energy Minister Shkolnik reported. According to the
National Statistics Agency, Kazakhstan produced 50.6 million
tons of oil in 2004. (Interfax - Kazakhstan, December 19)

Kazakhstan Commissions Atasu-Alashankou Pipeline
-------------- ---

6. On December 15 President Nazarbayev formally opened a
900-kilometer oil pipeline linking Atasu in central
Kazakhstan with Alashankou in the north-western Chinese
province of Xinjiang. Its initial capacity is around
210,000 bpd. The $800-million line was paid for by
KazMunayGaz, Kazakhstan's state oil company, and the
Chinese National Petroleum Corporation. The pipeline will
initially be filled by crude delivered by rail from Aktobe
and western Siberia. Within the next few years, a pipeline
that links Atasu with the Kumkol field will be reversed to
allow Kumkol's oil to be delivered to China. After 2010, a
pipeline will be built between Kumkol and Kenkiyak to link

China to other Kazakhstani oil fields. At that time, the
capacity of the line is to be doubled. The Kenkiyak-Atyrau
pipeline was commissioned in 2003. (The Economist
Intelligence Unit, December 19)
KMG, Shell & Oman Pearls Sign PSA
--------------

7. On December 14 KazMunayGaz (KMG),Shell, and Oman Pearls
Company signed a Production Sharing Agreement (PSA) to
develop the Zhemchuzhina field in the Kazakhstani sector of
the Caspian Sea. The participants (KMG - 25%, Shell - 55%,
Oman Pearls Company - 20%) intend to begin exploration in

2006. The project's recoverable hydrocarbon reserves are
estimated at 750 million barrels. According to the PSA
terms, the contractors pledge to carry out a $30-million
exploration program and employ Kazakhstani "local content".
(Interfax - Kazakhstan, December 19)
Ex Vice-President of KMG Heads KazEnergy Association
-------------- --------------


8. The former first vice-president of KazMunayGaz (KMG),
Timur Kulibaev, has been appointed CEO of "KazEnergy
Association." According to the press source, the new
association, recently established by KMG and its
subsidiaries, was created to facilitate dialogue between
energy companies and the authorities, and to participate in
the drafting of laws related to the energy industry.
(Interfax - Kazakhstan, December 19)

PetroKazakhstan Wins One Case; Another Advances
-------------- --


9. PetroKazakhstan, recently acquired by CNPC, won its
appeal of a court decision that obliged the company to pay
$720 million for anti-monopoly violations associated with
the Shymkent refinery.


10. The criminal investigation into activities of former
PetroKazakhstan executives has been completed and the case
submitted to the Procurator General's Office, the Deputy
Chair of Kazakhstan's Financial Police Kenenbaev announced
on December 23. As reported earlier, the Financial Police
brought charges against three foreign citizens accused of
antimonopoly law violation. (Interfax - Kazakhstan,
December 23)

ORDWAY


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