KAZAKHSTAN: NEW OIL AND URANIUM DEALS WITH INDIA

UNCLAS SECTION 01 OF 02 ASTANA 000200

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E.O. 12958: N/A
TAGS: PREL PGOV ECON EPET ENRG EINV EMIN KNNP IN KZ
SUBJECT: KAZAKHSTAN: NEW OIL AND URANIUM DEALS WITH INDIA

REF: (A) NEW DELHI 0190
(B) 08 ASTANA 1910
(C) 08 ASTANA 2535

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


2. (SBU) SUMMARY: On January 23-26, at the invitation of Indian
President Pratibha Patil, President Nazarbayev, accompanied by more
than 100 state and private business representatives, paid an
official visit to India, seven years after his last trip to Delhi in
February 2002. During the visit, India and Kazakhstan agreed to two
significant energy deals, one for the exploration of the Satpayev
oil field in the North Caspian, and one for the supply of
approximately 300 tons of uranium to India annually for five years
(1,500 to 2,000 tons in total). Kazakhstan imports Indian tea,
pharmaceuticals, textiles, foods, tobacco, rubber products, and
electronic equipment, and exports to India salt, cement, leather,
and non-ferrous ores. During the first 10 months of 2008, trade
between Kazakhstan and India totaled $308 million. END SUMMARY.

INDIA'S NATIONAL OIL COMPANY SIGNS SATPAYEV AGREEMENT


3. (U) After seven years of negotiations, Kazakhstan's national oil
and gas company, KazMunayGas (KMG),and India's Oil and Natural Gas
Corporation (ONGC),together with India's Mittal Energy Limited,
signed an agreement to explore the Satpayev offshore Caspian oil
reservoir, which has estimated recoverable reserves of 253 million
tons of crude oil. According to India's Petroleum Secretary R.S.
Pandey, a newly established joint venture of ONGC and Mittal Energy
will pay an $80 million signing bonus for a 25 percent stake in the
project, with the option of an additional 10 percent upon commercial
discovery. KMG will be the lead operator of the field and hold the
remaining 75 percent stake.


4. (SBU) On January 30, D.C. Manjunath, Second Secretary of the
Embassy of India, told Energy Officer that President Nursultan
Nazarbayev's visit to India was helpful in moving negotiations
forward. He said that KMG and ONGC first signed a memorandum of
understanding in 2005 and expressed frustration that the Satpayev
deal has taken so long to consummate. He called the Heads of
Agreement signed during Nazarbayev's visit "long overdue."
Manjunath said there is no deadline to sign a contract for the
exploration and production of the Satpayev field, but he indicated
that ONGC is eager to come to terms before proposed changes to the
Subsoil Law take effect. (NOTE: Kazakhstan's new Subsoil Law will
eliminate the use of production sharing agreements, require separate
exploration and production contracts, and impose stricter local
content requirements. See reftel B. END NOTE.)

KAZAKHSTAN COURTING INDIAN INVESTMENT IN PETROCHEMICAL PLANT


4. (U) After Nazarbayev met with Indian Oil Industry Minister
Moorli Deora, Kazakhstan invited Gali India Ltd. and Indian Oil
Corp. to enter into negotiations on the construction of a
petrochemical plant in Kazakhstan. (NOTE: On January 22,
Kazakhstan's Prime Minister Karim Masimov attended a groundbreaking
ceremony for the Karabatan Petrochemical Plant in Atyrau Oblast,
which has a design capacity of 1.2 million tons of polyethylene and
polypropylene per year. The plant is expected to receive and refine
oil from the supergiant Kashagan field beginning in 2012. END
NOTE.)

KAZATOMPROM TO SUPPLY URANIUM TO INDIA


5. (SBU) Also during Nazarbayev's visit, Kazakhstan's national
nuclear energy company Kazatomprom (KAP) and the Nuclear Power
Corporation of India Limited (NPCIL),run by India's State
Department of Atomic Energy, signed a memorandum of understanding
and cooperation. According to Kazatomprom, the two companies will
cooperate in the extraction and production of uranium, the supply of
uranium pellets and fuel assemblies to Indian nuclear facilities,
and the training of KAP personnel. KAP also announced that it will

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take advantage of the opportunity to review the technical
feasibility studies for India's heavy-water nuclear reactors in
order to assess whether plants of similar design would be suitable
for Kazakhstan. Manjunath from the Embassy of India said India is
most interested in conducting joint mining activities in Kazakhstan
and securing a long-term contract to ensure the steady supply of
uranium. He also noted that the MOU is broadly defined and could
allow KAP and NPCIL to sign specific agreements on technology
transfer and value added production.


6. (SBU) During a January 16 meeting with Energy Officer,
Kazatomprom Vice President Sergei Yashin explained that under the
agreement, Kazakhstan will supply approximately 300 tons of uranium
and processed fuel annually to India for up to five years. Yashin
said that India's nuclear power plants require both new power blocks
and a guaranteed supply of uranium. He said that KAP partners
Westinghouse -- in which KAP owns a 10 percent share -- and General
Electric will build the reactors and KAP will guarantee the supply
of uranium. Yashin confirmed KAP's plans to become the world's
number one exporter of uranium by 2010, and he said they will
increase uranium production from 8,500 tons in 2008 to 11,900 tons
in 2009 (see reftel C).

FUTURE TECHNCIAL AND ECONOMIC COOPERATION WITH INDIA


7. (U) Before Nazarbayev's visit, India's Ambassador to Kazakhstan,
Ashok Sanjhar, announced at a press conference that the government
of India is eager to expand the scale of technical and economic
cooperation with Kazakhstan. Under an existing bilateral program,
each year approximately 100 Kazakhstani technicians, military
officers, businessmen, and government officials receive training at
India's top universities in information technology, English
language, mass media, environment, education, banking, textile
manufacturing, and pharmaceutical production. Sanjhar suggested
other opportunities for cooperation with Kazakhstan, including
establishing a new Kazakhstani-Indian Technical Institute,
initiating an educational exchange program, and opening centers of
Indian medicine in Almaty and Astana to treat cardiovascular and
oncologic diseases.

HOAGLAND