Identifier
Created
Classification
Origin
08ASTANA1368
2008-07-30 10:31:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:  

KAZAKHSTAN - ASTANA CONFERENCE DISCUSSES SULFUR STORAGE,

Tags:  EPET SENV PGOV PREL KZ 
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VZCZCXRO9283
OO RUEHAST RUEHBI RUEHCI RUEHLH RUEHLN RUEHPW RUEHVK RUEHYG
DE RUEHTA #1368/01 2121031
ZNR UUUUU ZZH
O 301031Z JUL 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2865
INFO RUCNCIS/CIS COLLECTIVE 0586
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
UNCLAS SECTION 01 OF 02 ASTANA 001368 

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EPET SENV PGOV PREL KZ
SUBJECT: KAZAKHSTAN - ASTANA CONFERENCE DISCUSSES SULFUR STORAGE,
TRANSPORTATION, AND SALE

SUMMARY
-------

UNCLAS SECTION 01 OF 02 ASTANA 001368

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EPET SENV PGOV PREL KZ
SUBJECT: KAZAKHSTAN - ASTANA CONFERENCE DISCUSSES SULFUR STORAGE,
TRANSPORTATION, AND SALE

SUMMARY
--------------


1. (U) The Kazakhstan-Canada Business Association (KCBA),in
partnership with Canada's Alberta Sulfur Research Ltd. organized the
First International Conference on Sulfur Reutilization and
Sustainable Development in Astana on July 9. Representatives of the
Ministry of Energy and Mineral Resources, Ministry of Industry and
Trade, Shell, Chevron, TengizChevrOil, Agip KCO, the Kazakhstan Oil
and Gas Institute, the nuclear joint venture Inkai (owned by
Kazakhstan's national nuclear holding company Kazatomprom and
Canada's Cameco Corporation),the nuclear joint venture Catco (owned
by Kazatomprom and France's Areva),and others discussed the
environmental impact of sulfur, its storage, transportation, and
utilization, and other regulatory and business issues relevant to
sulfur. End Summary.

SULPHUR SOLD TO 24 COUNTRIES
--------------


2. (U) As of January 1, 2008, Tengizchevroil (TCO) was storing 8.4
million tons of sulfur in open-air storage at the Tengiz oil field.
In 2007, TCO produced 1.6 million tons of sulfur. TCO's second
generation expansion will result in significantly increased sulfur
production, up to 2.4 million tons per year. According to TCO Rail
Transportation Manager Ruslan Davletukayev, of the 2 million tons of
sulfur sold by TCO in 2007, 40% (approximately 800 thousand tons)
were sold to Mediterranean countries (Morocco, Israel, Egypt, etc.);
32% to Russia and other CIS countries; 24% to China; and 4% to
Kazakhstan. Sulfur is supplied to 24 countries in one of four forms
-- granulated, liquid, flake, or lump form. During the second half
of 2008, TCO plans to introduce additional granulating equipment,
thereby increasing the production of granulated sulfur, which is the
standard form for shipping and the one preferred by customers. TCO
also ships liquid sulfur in 300 special heated tank-cars to the CIS
(mostly to Russia's Balakov Plant). Flake sulfur is shipped to
China and the CIS in 700 covered rail wagons. According to Chinese
regulations, flake sulfur must be shipped in 50-kilogram
polypropylene bags, and be granted special shipment permission from
a lab at the Urumchi railway station. Sulfur in lumps is shipped in
standard gondolas (semi-wagons),covered with a special fabric, to

the CIS, Morocco, Egypt, and other countries.

OFFICIAL CLAIMS OPEN SULFUR STORAGE IS A HAZARD
-------------- --------------


3. (U) Raushan Sarmurzina, Director of the Petrochemical Department
at the Ministry of Energy and Mineral Resources, claimed that
although sulfur is not classified as a toxic element, long-term open
storage may have adverse environmental effects, including the
formation of sulfuric acid, sulfur oxidation (decay),and discharge
of toxic hydrogen sulfide. (Note: TCO's position is that it takes
appropriate measures to minimize the risks associated with open
storage of block sulfur. End Note.)


4. (U) Rita Sagyndykova, Senior Manager of the Kazakhstan Oil and
Gas Institute (KOGI); Almagul Kushugulova, Director of Genetics and
Biochemistry Lab at the National Center for Biotechnology; and Paul
Davis, General Manager of Alberta Sulphur Research Ltd. enumerated
the advantages of underground sulfur storage over above-ground
sulfur storage. Sulfur oxidation is reduced through underground
sulfur storage. Moreover, with above-groud storage, controlling
acid run-off is costly, and to neutralize the effects of exposure,
sulfur blocks must be coated with some form of coating (including
acrylics, limestone, breathable membranes capped in soil, or
spray-on layers). Similarly, with above-ground storage, sulfur
block temperatures must be controlled to prevent decay.


5. (U) In March 2007, President Nazarbayev called for the creation
of a National Sulfur Storage Center (NSSC). According to
Sagyndykova, the legal aspects of the NSSC must be carefully
considered because there is no precedent for the establishment and
operation of such a center either in Kazakhstan or abroad. The
Ministries of Energy and Environmental Protection are expected to
monitor and control NSCC compliance with legislation and
environmental regulations. The project will be designed by KOGI and
the tender process for construction and operation administrated by
the Caspi social-entrepreneurial corporation.

SULFUR UTILIZATION
--------------


6. (U) Campbell Keir, Managing Director of Shell Kazakhstan
Development; Aibat Sherikbayev, Acting Chairman of KCBA; Pascal
Bernasconi, Director of Catco; Serghey Breus, General Director of
Inkai; and Almagul Kushugulova proposed alternative uses of sulfur
such as making asphalt, concrete, and micro-fertilizers. Shell
specifically has an extensive history of sulfur utilization, working
for more than 60 years with regional authorities in Canada.


ASTANA 00001368 002 OF 002



7. (U) Sulfur is used to produce sulfuric acid, which is a vital
component in the processing of uranium. One processed kilogram of
uranium requires as much as 50-150 kilograms of sulfuric acid for
production, and the demand for sulfuric acid is expected to increase
as Kazakhstan boosts its uranium output from 9,000 tons in 2008 to
an expected 12,000 in 2009. During her press interview at the
forum, Sarmurzina mentioned that Kazatomprom plans to build two
sulfuric acid plants, one in Kyzylorda Oblast and the second in the
city of Stepnogorsk in North Kazakhstan Oblast, which are expected
to respectively process 250,000 and 300,000 tons of sulfur
respectively annually.

TRANSPORTATION PROBLEMS HINDER SALES
--------------


8. (U) Most of the speakers acknowledged the challenges TCO
continues to face regarding sulfur transportation. For example, of
the 22,500 rail cars TCO owns, 4,300 are used to ship sulfur.
Sulfur is shipped via one of two hubs -- Alashankou (on the border
with China),and the Ilyichevsk seaport in the Ukraine. TCO also
faces complications with additional shipment requirements posed by
Kazakhstan's Temir Zholy national railway company. According to
Sarmurzina, as much as 3 million tons of sulfur a year could be sold
if transportation capacity was expanded.

COMMENT
--------------


9. (SBU) With sulfur prices at record levels, TCO is effectively
sitting on $4-6 billion worth of sulfur, and the consortium's sulfur
sales are becoming an important profit stream, yielding $120 million
during the first quarter of 2008. A June meeting between Chevron
CEO Dave O'Reilly and President Nazarbayev has reportedly produced
an acceptable compromise on the $300 million environmental fine
levied against TCO for sulfur storage. TCO, of course, has
maintained all along that it received all the necessary permits for
sulfur production and that no permits are necessary -- or available
-- for continued sulfur storage. End Comment.

ORDWAY



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