KAZAKHSTAN: BRITISH FCO,S CASPIAN ENERGY ADVISOR

C O N F I D E N T I A L ASTANA 002118 SIPDIS STATE FOR SCA/CEN, EUR/CARC, EEB STATE PLEASE PASS USTDA FOR DAN STEIN E.O. 12958: DECL: 10/24/2018 TAGS: PGOV EPET EWWT AJ KZ SUBJECT: KAZAKHSTAN: BRITISH FCO,S CASPIAN ENERGY ADVISOR EXPRESSES CONCERNS ON CROSS-CASPIAN MARITIME CAPACITY REF: ASTANA 2101 Classified By: Ambassador Richard Hoagland, Reasons 1.4 (b) and (d) ¶1. (C) During an October 15 meeting with the Ambassador, Angus Miller, Caspian Region Energy Advisor to Britain's Foreign and Commonwealth Office, expressed his concerns that Kazakhstan will not be able to expand its maritime capacity quickly enough to handle the expected volumes of Kazakhstani crude requiring transport across the Caspian to Baku. ¶2. (C) Miller noted that Deputy Energy Minister Lyazzat Kiinov had said publicly at the KIOGE conference that crude transported via the Kazakhstan Caspian Transportation System (KCTS) will be shipped only by Kazakhstani and Azerbaijani tankers, with international shippers excluded from the action (see reftel). The Kazakhstanis also expect that their vessels will be manned solely by Kazakhstani crews. Miller told the Ambassador it will be challenging enough for Kazakhstan to build in time the necessary tankers (six to eight, if they are large tankers of 60,000 dwt),while training such a sizable contingent of new Kazakhstani seamen presents even greater hurdles. He believes that this will put pressure on the Kazakhstanis to lower standards for both vessels and crews. Miller also maintained that if Kazakhstan is unable to increase its maritime capacity to handle all the crude, there will be an opening for the Iranians to get involved in shipping it, as the Iranians already have the largest fleet on the Caspian. ¶3. (C) Miller said that he had just come from a meeting with Kiinov, who rebuked Miller for Miller's address at KIOGE in which he had argued that Kazakhstan's lack of preparedness for cross-Caspian crude shipment is creating economic and political vulnerabilities for the country. Miller said that in the end, Kiinov admitted to him that there are serious problems in building up Kazakhstan's maritime capacity for KCTS. Miller told the Ambassador that he had also met with the international oil companies operating in Kazakhstan together with Kazakhstani port authorities. The companies expressed concerns in line with Miller's on Kazakhstan's maritime capacity and maritime standards. An Aktau port official explained that Kazakhstan had installed a maritime radar system for the Aktau area, but does not have the personnel to run it properly. As a result, the radar can not be used for active maritime management and collision avoidance; rather, it is just a passive system for now. ¶4. (C) Miller stressed to the Ambassador that in his view, the international companies need to provide assistance to KazMorTransFlot (KMTF) -- Kazakhstan's national maritime shipping company, which is owned 50 percent by KazMunaiGas (KMG) and 50 percent by Samruk-Kazyna -- to build up its crew capacity and to ensure that crews are trained to international standards. HOAGLAND