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07ASTANA161 2007-01-19 10:02:00 UNCLASSIFIED Embassy Astana
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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.

-- Finance Minister Nominates Deputies
-- National Holding Company "KazAgro" Created
-- Kazakhstan Passes Amendments to the Law on Subsoil Use
-- CITIC Buys Nations Energy's Kazakhstani Assets
-- 2006 Oil & Gas Production

Finance Minister Nominates Deputies


2. On January 15, Kazakhstani Minister of Finance Nataliya Korzhova
announced names of her new deputies: Bakhyt Sultanov and Daulet
Yergozhin. Mr. Sultanov, age 35, worked previously as Chairman of
National Statistics Agency; Mr. Yergozhin, aged 27, was Head of the
Special Tax Department, Ministry of Finance. (Interfax -
Kazakhstan, January 15)

National Holding Company, KazAgro, Created


3. In December 2006 Kazakhstani President Nursultan Nazarbayev
signed a decree establishing the KazAgro national holding company to
facilitate the development of the country's agro-industrial sector
and make it more competitive in domestic and foreign markets. On
January 15, Alikhan Smailov, a former Deputy Finance Minister, was
named as Chairman of the KazAgro's Management Board.

4. On January 17, Smailov announced that the GOK would contribute
its shares of seven state companies to build up KazAgro's
authorized capital: "Food Contract Corporation," "Agrarian Credit
Corporation," "Kazagrofinance," "Agriculture Support Fund," "Mal
Onimderi Korporatsiyasy," "Grain Receipt Guarantee Fund" and
"Kazagromarketing." According to Smailov, "The Ministry of
Agriculture will be fully responsible for 100% of KazAgro stock.
KazAgro's initial authorized capital consists of KZT 300 million
[about $2.4 million.4 million] funded by the 2007 budget, but will reach KZT
80 billion [about $640 million] after the contribution of the
above-mentioned equity shares." (Interfax - Kazakhstan, January

Kazakhstan Passes Amendments to the Law on Subsoil Use



5. On January 15, President Nazarbayev signed into law amendments
to the Kazakhstani "Law on Oil" and the "Law on Subsoil and Subsoil
Use." The amendments introduce new standards aimed at ensuring
transparency in the purchase of goods, work and services associated
with subsoil use activities, as well as new norms which regulate the
process of granting subsoil use rights and the awarding of
contracts. The law defines the State's right to disallow a company
from participating in a tender competition on the basis of "national
security" interests. New norms will obligate contractors to provide
non-discriminatory work conditions and provide equal pay to local
and foreign personnel. These amendments further tighten the GOK's
application of local content requirements, requiring companies to
meet local content benchmarks annually, rather than on average over
the lifetime of a project. (Interfax - Kazakhstan, January 15)

CITIC Buys Nations Energy's Kazakhstani Assets



6. On October 25, Canadian-registered Nations Energy officially
announced its intention to sell the company's Kazakhstani oil assets
(Karazhanbasmunay) to the China International Trust and Investment
Corp (CITIC) for $1.91 billion. CITIC Group successfully closed the
deal on December 30 after it signed an agreement granting the
national oil and gas company KazMunayGaz (KMG) the option, valid for
a year, to purchase 50% of Nations Energy's shares for $955 million.
(According to Kazakhstani legislation, the GOK has a priority right

ASTANA 00000161 002.2 OF 002

to purchase the assets of extractive industries in the Republic
should such assets be offered for sale.) Nations Energy operates
the "Karazhanbas" field in Kazakhstan. The company produces 50,000
barrels of oil per day and holds reserves of 340 million barrels.
(Oil Review - Kazakhstan, January 9)

Oil & Gas Production in 2006


7. According to the Kazakhstani Ministry of Energy and Natural
Resources, Kazakhstan produced 64.9 million tons of oil and gas
condensate in 2006, 5.5% higher than in 2005, including 59.2 million
tons of oil (up 7.1%) and 5.7 million tons of gas condensate (down
8%). TengizChevrOil produced the largest share, 13.3 million tons
of oil (down 1.8%). Other notable production figures include:
Karachaganak Petroleum Operating - 10.5 million tons (up 1%),
KazMunayGaz - 9.6 million tons (up 2%), PetroKazakhstan - 3.7
million tons (up 20.6%). In 2006 overall gas production reached
27.2 billion cubic meters, or 2.6% higher than in 2005. (Interfax -
Kazakhstan, January 12)