Identifier
Created
Classification
Origin
08ASTANA1964
2008-10-03 07:04:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:  

KAZAKHSTAN: DOING BUSINESS IN ATYRAU

Tags:  PGOV EPET EINV KZ 
pdf how-to read a cable
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DE RUEHTA #1964/01 2770704
ZNR UUUUU ZZH
O 030704Z OCT 08 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3503
INFO RUCNCIS/CIS COLLECTIVE 0660
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2188
RUEHBJ/AMEMBASSY BEIJING 0063
RUEHKO/AMEMBASSY TOKYO 0772
RUEHIT/AMCONSUL ISTANBUL 0025
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
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RUEHBS/USEU BRUSSELS
UNCLAS SECTION 01 OF 02 ASTANA 001964 

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB
STATE PLEASE PASS TO TDA DAN STEIN

E.O. 12958: N/A
TAGS: PGOV EPET EINV KZ
SUBJECT: KAZAKHSTAN: DOING BUSINESS IN ATYRAU

UNCLAS SECTION 01 OF 02 ASTANA 001964

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EEB
STATE PLEASE PASS TO TDA DAN STEIN

E.O. 12958: N/A
TAGS: PGOV EPET EINV KZ
SUBJECT: KAZAKHSTAN: DOING BUSINESS IN ATYRAU


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: On September 18-20, DCM and Energy Officer
visited Atyrau, the oil capital of Kazakhstan on the northeastern
Caspian coastline. Local government officials said that they
welcome foreign investment and expressed interest in hosting an
event with the American Chamber of Commerce. International oil
companies working in Atyrau had no major complaints about the
business climate, but cited difficulty obtaining work permits for
foreign employees as a potential issue going forward. END SUMMARY.

ATYRAU OBLAST AUTHORITIES WELCOME AMCHAM PARTNERSHIP


3. (SBU) In a meeting with DCM and Energy Officer on September 18,
Atyrau oblast Deputy Akim (Governor) Nurman Nurbekov called Atyrau
the engine of growth for Kazakhstan's economy and said that the
oblast welcomed foreign investment. He called U.S. companies
"important players" and "good corporate citizens" active in the
local economy and specifically singled out Chevron, which owns 50%
of Tengizchevroil (TCO) and has allocated more than $380 million
from 1993 to 2007 to fund community development projects in health,
education, and training. When asked if there are any serious
disputes between the local government and U.S. companies, Nurbekov
said, "No, we have good relations with American companies and no
concerns, and we work things out with them at the local level."
Nurbekov told us that the oblast is eager to attract additional
foreign investment and would welcome the establishment of U.S. joint
ventures with Kazakhstani companies, particularly in the areas of
petrochemicals, food processing, and construction. When informed
about the Public-Private Economic Partnership Initiative (PPEPI),
Nurbekov said the akimat (oblast government) would be pleased to
participate, for example, by hosting a roundtable together with the
American Chamber of Commerce (AmCham),or by establishing a working
group to discuss issues related to improving the business climate in
Atyrau. "Whatever we can do at the local level," said Nurbekov, "we
will do." When informed that some international oil companies have
had difficulty obtaining work permits for their foreign employees,
Nurbekov explained that the Government of Kazakhstan issues a

certain number of work permits at the beginning of each year, based
on a request from state oil and gas company KazMunaiGas. He
conceded that the number of permits required might exceed the number
requested and said that he would have no objection to working with
individual companies to request additional work permits.

DIFFICULTY OBTAINING WORK PERMITS


4. (SBU) DCM and Energy Officer discussed the business climate in
Atyrau at a September 20 meeting with two representatives of oil
service companies, Dwayne Leismer, Atyrau-based International
Accounts Manager for Schlumberger, and Alastair Fleck, Almaty-based
East Caspian District Manager for Baker Hughes. Neither one had
major complaints or concerns about the local business climate,
although both mentioned difficulties in obtaining work permits and
the unpredictability of customs duties as constraints to doing
business in Atyrau. According to Leismer, since June 1, the
Government of Kazakhstan has employed a new system for evaluating
work permit requests, assigning points to each applicant based on
age, experience, education, vocational training, and other factors.
Unlike in the past, the new system allows a foreign employee to work
in more than one oblast, but according to Leismer and Fleck,
evaluation standards are not uniform across oblasts, and the
Government has not determined how to score an applicant's work
permit request if the applicant plans to work in more than one
oblast.


5. (SBU) Schlumberger's Leismer also said that work permit
application procedures have become more onerous for foreign
companies since the new regulation was adopted. For example,
applicants must submit notarized, translated copies of all
documentation, which creates delays and increases costs. As a
result, companies are not able to fill approved positions because
their preferred candidates cannot complete the procedures to obtain
a work permit in a timely manner. "This is potentially a very big

ASTANA 00001964 002 OF 002


issue for us," said Leismer. Both Leismer and Fleck noted that
despite substantial investments to enhance technical skills and
capacity among Kazakhstani workers, the oil and gas industry faces a
near-term shortage of skilled local labor, particularly petroleum
engineers, pipe fitters, and welders. The shortage is only
exacerbated, according to Leismer, by the fact that international
oil companies operating supergiant fields at Tengiz, Kashagan, and
Karachaganak are "poaching" the skilled staff of the oil service
companies. (NOTE: ExxonMobil Business Service Manager Adam Walker
independently confirmed that international oil companies are
likewise facing significant difficulties and delays obtaining work
permits in Atyrau oblast. END NOTE.) When asked about their
interest in the PPEPI, Leismer and Fleck said they were not aware of
the initiative but were favorably disposed and would like to learn
more. They also said that both of their companies intended to
become more active in the AmCham and suggested that on some issues,
such as customs and work permits, a collective approach to dialogue
with the government would be more productive than individual
lobbying.


6. (SBU) Agip Kazakhstan North Caspian Operating Company (Agip KCO)
Public Relations Manager Richard Fritz told DCM and Energy Officer
on September 20 that Agip KCO has had "constant battles with the
Atyrau akim" and called the Government of Kazakhstan's emissions
policy "insane" because it requires companies to describe in detail
all potential emissions before operations commence. Companies are
not given the option of amending or modifying the list without
penalty, according to Fritz, even if they make infrastructure
investments that lower emissions. Fritz also complained that Atyrau
oblast is "squeezing" Agip KCO for a collective bargaining
agreement, even though, according to Fritz, their employees have no
interest in joining a labor union or entering into a collective
agreement. Fritz said that Atyrau oblast officials threatened to
withhold Agip KCO work permits unless it agrees to a collective
bargaining agreement. Fritz volunteered that the Mangistau oblast
akim is "much easier to work with -- just night and day." (NOTE:
Mangistau oblast is the second and much smaller partner for energy
companies. END NOTE.)

HOAGLAND