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Kashagan Expansion May Finish Earlier, KazMunaiGaz CEO Says 0

Posted on November 04, 2011 by Alex

Nariman Gizitdinov and Hellmuth Tromm, Bloomberg Business Week, Oct 26, 2011

Oct. 27 (Bloomberg) — Royal Dutch Shell Plc and other partners in the Kashagan venture may complete expansion as early as 2017, allowing Kazakhstan to reach its goal of becoming one of the world’s biggest oil exporters faster.

“If the partners will choose the field’s development conception by the end of this year or beginning of next year” and the government approves it, the expansion may be finished by 2017 or 2018, as much as a year earlier than the company previously estimated, said Bolat Akchulakov, chief executive officer of KazMunaiGaz National Co., a partner in the project.

The venture, which also includes Eni SpA, Exxon Mobil Corp. and Total SA, has invested $33 billion in the Caspian development, where the first oil is scheduled to flow by the end of 2012. Kazakh President Nursultan Nazarbayev, who visited the oilfield last month, said the expansion will help turn Kazakhstan into one of the world’s five largest oil exporters.

In 2008 the partners agreed to cede a larger share in Kashagan, one of the world’s biggest oil fields, to KazMunaiGaz and pay higher royalties after government criticism of cost overruns and delays in the first phase. The second phase has stalled because Kazakhstan isn’t satisfied with proposed costs, a person with knowledge of the matter said in June.

It will take 1 1/2 years to complete a detailed plan for the expansion, Akchulakov said in an interview in Astana on Oct. 25. The partners may then need about six months to make final investment decisions and another four years to carry out the project, he said. KazMunaiGaz said last year the expansion has been delayed to 2018 or 2019.

Frozen Waters

“Kashagan is a very complex field not only because it’s offshore, but also because it’s in shallow waters and its oil has a high level” of polluting hydrogen sulfide, Akchulakov said. Large-scale gas injection into the field will require more careful planning than was done earlier, he said.

Water at Kashagan is only 3 to 6 meters deep, and low salinity combined with shallow waters and winter temperatures below minus 30 degrees Celsius (minus 22 Fahrenheit) result in the northern Caspian Sea freezing for almost five months of the year, according to Kashagan’s website. Ice drifts and ice scouring put heavy constraints on construction and production, and call for novel technical solutions, it said.

The northern Caspian is also a sensitive environmental area, home to sturgeon, seals, and coastal wetlands that attract a variety of birds, it said. The crude oil it contains has a high ‘sour gas’ content, with 15 percent hydrogen sulfide, the operator said.

Output at Kashagan, which has already been delayed three times, will reach about 370,000 barrels a day during the first phase and rise to a 450,000 barrels a day by 2015 or 2016, Oil and Gas Minister Sauat Mynbayev said on Oct. 4. The original start date of 2005 was pushed back to 2008 and Eni later said production would begin in 2010.

“If the oil production at Kashagan will start in December next year reaching stable output there will take time,” Akchulakov said. He didn’t give a forecast for when stable oil output may be reached.

–Editors: Hellmuth Tromm, Alex Devine

To contact the reporters on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net; Hellmuth Tromm in Berlin athtromm@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

 

SOURCE: http://www.kazakhembus.com/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=786&cntnt01origid=15&cntnt01returnid=201

 

 

 

Gasoline situation better – Mynbayev 0

Posted on October 21, 2011 by Alex

The situation on the Kazakh gasoline market is stabilizing, Minister of Oil and Gas Sauat Mynbayev said on Friday.   To help eliminate  gasoline shortages in the country, Kazakhstan’s national oil and gas company KazMunaiGas purchased 50,000 tonnes of Russian gasoline in September.

SOURCE: SRI, Kazakhstan Daily News Brief as of October 17, 2011

Kazakhstan Daily News Brief – October 7, 2011 0

Posted on October 06, 2011 by Alex

ENERGY:

Kazakhstan, Karachaganak partners yet to reach agreement – Mynbayev
(SRI) – Kazakhstan is yet to reach an agreement on buying into the Karachaganak oil and gas project, and new negotiations on the planned third phase of its development will be necessary once a deal is reached, Kazakhstan’s Minister of Oil and Gas Sauat Mynbayev said on Thursday.

Kazakhstan not ready to join EU-backed gas pipelines (SRI)

KazMunaiGas starts reserves audit (SRI)

Caspian oil shipments to fall amid work on CPC pipeline expansion (Reuters)

Max loses Kazakh tax appeal (Upstream Online)

Kazakh oil giant denies talks with striking workers (RFE/RL)

BUSINESS AND ECONOMY:

Kazkommertsbank receives $130 million to fund stalled construction projects (SRI)

Kazakhstan produces 23.8 million tonnes of grains to date (AgriMarket.Info)

Kazakh Ministry of Economic Development and Trade raises 2011 foreign trade forecast(Interfax)

Indicators – October 6, 2011 (Reuters)

POLITICS AND SECURITY:

Kazakhstan welcomes Putin’s Eurasian Union concept (Daily Telegraph)

SOCIETY:

Shrinking lake in Kazakhstan portends hard, dry times ahead (Washington Times)

SOURCE: http://silkroadintelligencer.com/2011/10/07/kazakhstan-daily-news-brief-october-7-2011/

Kazakhstan Daily News Roundup – September 5, 2011 0

Posted on September 06, 2011 by Alex

Kazakhstan Daily News Roundup – August 26, 2011 0

Posted on August 27, 2011 by Alex

ENERGY:

LG Chem to build $4-billion petrochemical plant in Kazakhstan
(SRI) – LG Chem, South Korea’s largest chemical company, signed a $4-billion deal on Thursday to develop a long-planned petrochemical complex in Kazakhstan, the company said in a statement.

Kazakhstan, Korea agree on guarantees for the Balkhash power plant project
(SRI) – Kazakhstan and South Korea signed an “intergovernmental agreement” on Thursday guaranteeing Korean companies a 70% stake in a $4.5-billion project to develop and finance the construction of a coal-fired power plant in the city of Balkhash.

Kazakhmys sells oil unit for $100 million (SRI)

KazMunaiGas, Korean oil consortium sign agreement on drilling rig (SRI)

BUSINESS AND ECONOMY:

Development Bank of Kazakhstan loses $61 million in first half (SRI)

Indicators – August 25, 2011 (Reuters)

METALS AND MINING:

Kazakhmys to buy back $250 million of shares listed in London
(SRI) – Kazakhstan’s Kazakhmys, a London-listed copper miner, said on Thursday its first-half profit before tax declined to $550 million from $631 million in the previous year and announced a share buyback worth up to $250 million.

Kazakhmys approves Bozshakol development project
(SRI) – Kazakhstan’s largest miner Kazakhmys has approved a $1.8-billion development of the Bozshakol deposit, a major copper growth project equivalent to a third of Kazakhmys’ current output, the miner said as it presented its first-half earnings.

Glencore to consider options for gold assets in 2012 (SRI)

Kazzinc accumulates copper concentrate stockpile worth $127 million (SRI)

Kazakhmys welcomes central bank’s decision to buy Kazakh gold (SRI)

REGIONAL:

PetroChina in Dushanzi refinery overhaul – sources (Reuters)

Russian spaceship crashes back to Earth (AFP)

SOURCE: http://silkroadintelligencer.com/2011/08/26/

 

Kazakhstan Daily News Roundup – August 18, 2011 0

Posted on August 19, 2011 by Alex

ENERGY:

On the move: Shell-led oil consortium names new head
(SRI) – Caspi Meruerty Operating Company B.V. (CMOC) has named Aslan Shapabayev the venture’s director general, the Trend news agency reported on Wednesday, citing the press office of Kazakh oil company KazMunaiTeniz.

Lukoil to abandon two offshore exploration projects in Kazakhstan (SRI)

Fluor awarded CPC expansion contract (SRI)

KazMunaiGas shareholders approve intergation of NBK subsidiary (SRI)

BUSINESS AND ECONOMY:

Halyk to buy back 50% of preferred shares in 2011 – CEO
(SRI) – Halyk Bank, Kazakhstan’s second-largest lender by assets, may buy back more than half of its preferred shares held by the state-owned holding and investment company Samruk-Kazyna by the end of the year, Reuters reported on Wednesday.

Kazakhstan to harvest 18.9 million tonnes in 2011 – forecast (SRI)

National Fund for Innovation to set up two venture funds (Interfax)

Indicators – August 17, 2011 (Reuters)

METALS AND MINING:

Glencore rumored to seek a stake in ENRC again
(SRI) – The world’s largest commodity trader Glencore International AG plans to acquire a 14.59% stake in Eurasian Natural Resources Corporation (ENRC) from one of the company’s founders, Alexander Mashkevich, Israeli news portal IzRus reported on Wednesday.

ENRC corporate governance review to be concluded mid-September (SRI)

ENRC first-half income grows 29% on higher commodity prices (SRI)

Ex-head of ENRC set for board as charges dropped – FT (Reuters)

Mining Machines supplies equipment to Kazchrome (Interfax)

SOCIETY:

Kazakhstan to buy Russian helicopters for ambulance aviation (Trend)

Striking oil workers’ leader sentenced in Kazakhstan (RFE/RL)

SOURCE: http://silkroadintelligencer.com/2011/08/18/

 

Kazakhstan Daily News Roundup – July 1, 2011 0

Posted on June 30, 2011 by KazCham

KazMunaiGas: Moving Up the Ranks 0

Posted on January 25, 2011 by KazCham

With its strategic investment plans and refinery modernization programs, KazMunaiGas is set to become one of the world’s major oil industry players. Birgit Brauer reports

KAZAKHSTAN’S NATIONAL OIL and gas company KazMunaiGas (KMG) is a big-time player in the region, but not yet so well-known elsewhere. That will likely change in the next few years as the company plans to grow to match the international majors with an ambitious strategy to develop and expand exploration, production, refining, transportation, and marketing.

KazMunaiGas, the flagship company of Kazakhstan’s economy, accounts for every tenth tenge of the state’s revenues, according to KMG Board Chairman Kairgeldy Kabyldin. KMG is Kazakhstan’s second-largest oil producer after Tengizchevroil and intends to become one of the top 30 oil producers in the world by 2015.

It’s already on its way, as can be seen in this year’s ranking of the world’s top oil companies by Petroleum Intelligence Weekly. Just one year after making it onto the list for the very first time, KMG ranks 41st out of 130 companies, putting it ahead of Devon Energy and

Hess of the United States and Britain’s BG Group.

KMG plans to invest as much as $4.5 billion a year to produce 25 million tons of oil annually by 2015 and to modernize the country’s three refineries: Atyrau, Pavlodar, and Shymkent. This also includes up to $2.5 billion a year for the giant Kashagan oil field, which it holds with other international oil companies, including ExxonMobil and Royal Dutch/Shell. This year, KMG is seeking to borrow $2 billion for the Kashagan project. The national wealth fund, Samruk-Kazyna, which owns KMG, is considering a share sale within three years, perhaps through a public offering.

Partly due to acquisitions, KMG has come a long way since its founding eight years ago. KMG had been eager early on to break into the lucrative European market and to develop assets abroad, but initial attempts failed. When it tried to gain control of Lithuania’s Mazeikiu Nafta refinery in 2006, it was outbid by a Polish company. One year later, KMG finally bought 75 percent of Romania’s second largest oil company, Rompetrol Group, which gave the company access to two Romanian oil refineries and a vast retail network of 630 gas stations in seven European countries, including France, Spain, and Ukraine. In 2009, KMG spent a total of $3.7 billion acquiring assets, including the remaining 25 percent in Rompetrol and a controlling stake in the Pavlodar Oil Refinery.

At home, KMG was gradually granted substantial preferences by the Kazakh government, enabling it to become the national champion and a formidable competitor for multinational oil companies within the country. KMG has the first right of refusal on any sale of assets and pre-emptive rights to offshore fields. It is entitled to 50 percent of shares in any new oil and gas development in the Caspian Sea.

KMG’s growing role has not been to the liking of some of the international oil companies operating in Kazakhstan. However, it has given Kazakhstan a much stronger bargaining position on existing and future oil projects and put paid to sometimes angry public debates about the country being taken advantage of by greedy foreign oil companies.

Over the past two years, KMG has signed a number of memorandums of understanding with international oil companies. One of them is a production-sharing agreement in June 2009 with ConocoPhilips of the United States, and Abu Dhabi’s Mubadala Development Co. to tap the Nursultan Block (also known as N Block) in the North Caspian. KMG holds 51 percent of the block, while ConocoPhilips and Mubadala each have 24.5 percent. The two foreign firms paid Kazakhstan a $100 million signature bonus and will finance all exploration costs. Kabyldin said at the time that the project would enable Kazakhstan to use new technology and international expertise in developing its offshore oil and gas.

KMG’s growing importance was further underscored last year when China’s sovereign wealth fund acquired an 11 percent stake in KMG’s London-traded unit, the subsidiary KazMunaiGas Exploration & Production (KMG EP), by purchasing global depositary receipts for $939 million. KMG EP made international headlines in 2006 when it raised approximately $2 billion in an IPO and has seen dynamic growth since. But the fall in world oil prices ate into last year’s profits. In 2009, KMG EP’s net profit fell 13 percent to $1.4 billion due to lower oil prices and higher taxes following the introduction of a new tax code over a year ago.

A presidential decree in March 2010 creating a new Ministry of Oil and Gas marks the beginning of a new stage for KMG’s development. The ministry took over the regulatory role of the oil and gas sector, previously largely exercised by KMG, and left the company to focus solely on the commercial aspects of the industry.

How this division of responsibilities will work out in practice is not yet clear. But there’s little doubt that KMG will soon be a name known around the globe. ?

Birgit Brauer, Ph.D., is The Economist correspondent in Almaty, where she has lived and worked since 1996. Her book on the oil sectors of Azerbaijan, Kazakhstan, and Russia is to be published by Palgrave in 2011.

Source: Invest in Kazakhstan

Higher Oil Prices Are Not Enough 0

Posted on January 21, 2011 by KazCham

Anthony Robinson looks at what the government’s new tax laws, plans to modify production-sharing agreements, and higher oil prices mean for Kazakhstan’s oil industry

HIGHER OIL PRICES have come as a relief to Kazakhstan’s fast-growing oil and gas sector, which continued to invest heavily in major field development and infrastructure. Exports, whose value dropped sharply as oil prices fell from a 2008 peak of $147/barrel, are also rising – giving a boost to tax revenues and enabling the government to replenish the National (oil) Fund and rebuild central bank reserves.

Despite cutbacks at some of the higher cost, older fields, overall oil and condensate production is being boosted by the giant on-shore fields of Tengiz and Karachaganak. Overall production rose nearly 7 percent to 76.5 million metric tons last year, of which 68 million metric tons were exported, according to Sauat Mynbaev, the minister of oil and gas. He forecasts output of 80 million metric tons this year.

But a return to higher prices is not enough to allay the concerns of the international oil companies about the new tax code introduced in 2009 – and indications that the government wants to modify the long-term production-sharing agreements (PSAs) signed in thel990s to reflect the huge changes in oil prices and other factors since they were signed. The new tax code is specifically designed to raise the burden on energy and metals producers in order to lighten it on small and medium enterprises. The idea is to support diversification of the economy away from its current unhealthy reliance on the extractive industries, which require vast amounts of capital but employ relatively few people.

Government spokesmen have said that the Kashagan PSA is unlikely to be modified – reflecting the on-going nature of the investment, the technical complexity of safely operating the giant off-shore field, and the fact that KazMunaiGas (KMG), the state oil and gas company, negotiated a new deal two years ago which gives it an equal share with the four international oil majors running the project -Exxon-Mobil, ENI, Shell and Total, with smaller stakes for Japan’s Inpex and Conoco-Phillips. KMG also has

without a state equity share is Karachaganak – but this anomaly is not likely to last long. Both Oil and Gas Minister Mynbayev and KMG Chairman Kairgeldy Kabyldin have confirmed that the government wants an equity stake for KMG in Karachaganak.

UK-based BG and Italy’s ENI are joint operators of the Karachaganak field with each currently holding a 32.5 percent stake, and the balance held by Chevron with 20 percent and Russia’s Lukoil with 15 percent. Karachaganak is one of the world’s richest deposits of gas condensate, a high quality light oil, with an estimated 1.2 billion metric tons of oil and condensate and 1,350 billion cubic meters of gas. It was in a parlous state when the western partners inherited the polluted and badly managed Soviet-era field on which they have spent several billion dollars to turn into a well-run, profitable business.

Mindful of the damage done to Russia’s standing with foreign investors by Rosneft’s takeover of Yukos, BP’s struggles at TNK, and the forced purchase by Gazprom of the Shell-controlled Sakhalin liquefied gas venture, the government is seeking an agreed solution at Karachaganak. But it cites KMG’s stake in the other two large projects as precedents and argues the broader case for the state to hold substantial stakes in the nation’s richest resource projects.

The standoff at time of writing was accompanied by pressure from the government’s tax, environmental protection, labor and other agencies which presented the KPO consortium with a $1.3 billion cocktail of disputed tax claims and fines for alleged infractions of ecological, labor and other codes, which KPO disputes. Industry commentators, who recall similar pressure when KMG was seeking parity in Kashagan, suggest the claims could be at least partially dropped as part of a deal over the desired KMG stake.

On May 19 deputy oil minister Lyazzat Kiinov told reporters at an oil and gas conference in Paris that the government would not force an entry into the company, adding: “We are ready to repay the historical costs and contribute to our share equally with other other partners.” Mehmet Ogutcu, BG’s director for international and governmental affairs, later told Bloomberg that KPO shareholders wanted to resolve the tax and other issues with the government as soon as possible and were trying to work out a common position with regard to the future composition of the consortium.

What unsettles the international oil companies, who are about to embark on multi-billion dollar “third generation” developments, is that the Karachaganak saga is taking place against the background of increasing ambiguity about the government’s commitment to PSAs, and suggestions that the new tax laws should be universally applicable in the name of transparency and “leveling the playing field” for all foreign investors. Kazakhstan’s track record thus far indicates that changes will continue to be negotiated and ultimately be acceptable to both sides. Prime Minister Karim Massimov addresses these concerns in an interview on pages 22 to 25.

Meanwhile, the rapid development of new gas technologies, which have opened up vast shale deposits in the United States, Poland and elsewhere, is having a big impact on assumptions about future global gas prices and supply patterns -just as Kazakhstan’s associated gas output from the new deep oil fields is rising strongly.

Most Kazakh gas is associated with oil production and will be re-injected to keep up pressure in the oilfields. The government also imposes heavy fines on gas flaring, which fell by more than 60 percent in 2009 as oil companies invested in gas treatment plants to supply domestic customers and small power stations. Gas from the condensate field of Karachaganak is already exported to Orenburg in Russia for processing, and by the middle of 2010 Kazakh gas will also be exported to China via a new export line from Beinau to the Chinese border, which will also supply gas to southern Kazakhstan.

Looking further ahead, some Kazakh gas could also be exported to Europe. But this will require either building an expensive liquefied natural gas plant and liquefied gas tankers, or a gas pipeline to cross the Caspian to Baku. This investment will not be forthcoming until Europe makes up its mind whether to opt for the Nabucco project, entailing a new pipeline through Turkey to Central Europe, or Russia’s South Stream project under the Black Sea. Neighboring Turkmenistan, with vast on- and off­shore gas reserves, faces a similar dilemma.

Against this uncertain background, the government is also pressing ahead with plans to develop a domestic gas-based petrochemical industry and export value-added petrochemicals – mainly to China. ?

Anthony Robinson is a former Financial Times Moscow correspondent, and East Europe editor and originator of the Russian business newspaper Vedomosti.

SOURCE: Invest in Kazakhstan 2010

Leaner, Wiser, Better 0

Posted on January 03, 2011 by KazCham

Kazakhstan has used the crisis to push forward ambitious reforms in banking and investments in infrastructure, writes Anthony Robinson

KAZAKHSTAN HAS EMERGED from the global financial crisis leaner, wiser and significantly better-placed to exploit both its natural resource wealth and its rising geo-political status.

As one of the first countries to be knocked sideways by the global financial crisis, Kazakhstan has had longer than most to grapple with a grossly over-borrowed and under-regulated banking system suddenly unable to re­finance $45 billion of foreign borrowing. Time has not been wasted. The crisis has been used to push forward with structural reforms and ambitious investment programs. Banks have been recapitalized and their debts restructured.

Heavy investment in giant oil and gas projects continued throughout the crisis. So did the building of roads, railways, power lines, ports and new pipelines from the oil-rich West to energy-hungry China. Continuing growth in China helped offset the steep decline in demand from elsewhere for energy and metals, which still form more than 75 percent of exports. Economic growth resumed in the last quarter of 2009 and has strengthened since with the recovery of oil and commodity prices and the global economy generally.

Kazakhstan’s technocratic government, headed by Prime Minister Karim Massimov, who speaks Mandarin and Arabic, as well as fluent English and Russian, responded to the crisis by devaluing the tenge in February 2009, drawing $19 billion from central bank reserves and the National (oil) Fund to finance stimulus spending – and turning to China, South Korea and the Gulf states for investment funding.

President Nursultan Nazarbayev brought back Grigori Marchenko, one of the main architects of banking and pension fund reforms, to head the central bank and push through a tough bank restructuring. Free-lending foreign creditors were told that the state had no intention of bailing them out. Debt restructuring imposed substantial “haircuts” on creditors while locally-owned “systemic” banks have been recapitalized with state funds. Two restructured banks kept alive through partial recapitalization by the state, BTA and Alliance, are now for sale, while Samruk-Kazyna, the state holding company charged with funding the banks, expects to be repaid before long by the other two big private banks, Halyk and Kazkommertz.

The tough line with creditors reflects underlying confidence that the combination of mineral wealth, a developed financial system, and a relatively stable political system committed to economic, social and institutional reform will continue to attract foreign

investment – and permit restrained resumption of international borrowing.

Troika Dialog, a Moscow-based Investment Bank, puts Kazakhstan in the same potential wealth bracket as two other vast mineral and resource-rich countries with small populations and severe climates: Australia and Canada. Given the pace of change since Kazakhstan gained independence 20 years ago next year, and a geo­political revolution that has transformed this Eurasian heartland from Soviet backwater into strategic transit link between China, Europe and the Middle East, it is no longer fanciful to imagine Kazakhstan as one of the main gainers of the 21st century shift in global power.

“The greatest risks remain the oil price, the long-term pressure of its geopolitical location, and the threat of instability from the south,” Troika noted, along with what it termed “the single-man risk.” President Nazarbayevhas ruled since morphing seamlessly from communist party boss of Soviet Kazakhstan to president in 1991. Whether the country can ensure a well-managed transition to a new political generation, as in Singapore and other states seen as models, or lapse into the sort of political and ethnic conflicts experienced by other former Soviet states such as Ukraine and Kyrgyzstan, is an obvious concern.

Political power is wielded by President Nazarbayev, and backed by his administration and national welfare fund Samruk-Kazyna, run by Kairat Kelimbetov, a former head of the presidential administration. The Parliament, or Majilis, is essentially decorative, as in Soviet times. In this multi-ethnic state where nominally Muslim ethnic Kazakhs are barely a majority, the president rules by balancing and mediating between political clans, competing regions, and economic and financial groups and the individuals behind them.

The president demonstrates continuing energy and curiosity and travels widely to cement a wide range of international alliances. All new deals with China, South Korea, the Gulf States, and others were personally supervised by him, and often signed and sealed during state visits. Recent trips have taken the president to Washington, Beijing, Seoul, and Brasilia, to name but a few. And in January, Kazakhstan took over the annual chairmanship of the Organization for Security and Co-operation in Europe (OSCE).

For his many supporters, the president, who celebrates his 70th birthday in July and faces presidential elections in 2012, is transforming Kazakhstan into an economically dynamic, domestically stable and internationally respected sovereign state. They point to the 91 percent of the votes he won at the last elections in 2005, and support for presidential party Nur Otan, which won every seat in the last parliamentary elections in 2008, as evidence of genuine support. The electoral system may not be perfect, they concede, but Kazakhs are more prosperous and enjoy more civil liberties than their neighbors and can look forward to an even more prosperous future.

The president’s critics, who struggle to make their voices heard or put forward coherent alternative policies, accuse him of acting like a Khan (the former autocratic rulers of the ancient Silk Road city-states), of amassing great wealth for his family and trusted allies, of suppressing internal dissent, and of exercising undue influence over the judiciary. Other criticisms include harassment of the media, and generally stunting the growth of civil society and a more open, democratic political system.

Some of the measures taken to restore confidence in the banks and the economy have further weakened potential political rivals. The former head of BTA bank, Mukhtar Ablyazov, was one of the leaders of the Democratic Choice movement a decade ago. Although he pledged to keep out of politics in return for early release from jail, he helped finance several opposition publications and movements. He is now in exile, fighting through the English courts against the state takeover of his bank. In Kazakhstan he is accused of money laundering, embezzlement of billions of depositors’ funds, and fraud. Less fortunate is Mukhtar Dzhakishev, the former head of Kazatomprom, who has just begun a 14-year jail sentence after a secret trial for allegedly stealing assets from the company. The two men were friends.

During his recent visit to Washington to attend the global nuclear summit, President Nazarbayev was also asked by President Obama about the fate of Yevgeni Zhovtis, Kazakhstan’s leading civil rights lawyer. He was jailed for four years after a contested trial following a fatal traffic accident.

Foreign investors – including international oil companies and U.S. corporations such as AES – have also felt the iron fist beneath the velvet glove to remind them about their investment obligations. When the government decided that it wanted a bigger stake in power generation in order to stimulate development in this sector, AES was obliged to sell half of its Ekibastuz power plants.

When authorities decided that KazMunaiGas (KMG), the state oil company, should have an equal stake in the giant off-shore Kashagan field, international companies had to concede, as ENI and BG, who are facing similar pressures now, are well aware. However, in all cases the assets were bought at market-linked prices, not confiscated. Big foreign investors have direct access to the president and government to

voice any concerns at the twice-yearly meetings of the Foreign Investors Council.

Oil companies are also well aware that, despite KMG’s privileges and higher taxes on extractive industries, Kazakhstan remains one of a dwindling number of countries where even smaller foreign energy companies can still develop fields and book reserves.

Meanwhile, the Australian government’s recent decision to levy a swingeing excess profits tax on mining companies, and the U.S. government’s stated intention to hold BP accountable as the oil spill drama unfolds in the Gulf of Mexico are useful reminders that all governments seek to ensure that rents from mining natural resources accrue as far as possible to the host country and its voters.

What is incontrovertible is that Kazakhstan is now firmly anchored on the map. Some 20 years ago it was not clear whether ethnically diverse and economically dependent Kazakhstan could survive as a sovereign state. In Czarist times, largely ethnic Russian populated northern Kazakhstan was part of southern Siberia. Chinese imperial maps show no borders between Xinjiang province and the steppe beyond. A carve up into old spheres of influence was not inconceivable. Today, however, the new capital of Astana is a thriving steppe city of 600,000.

The president has ensured that closer ties with China are counter-balanced by entry into a new Customs Union with Russia and Belarus. This transforms Kazakhstan’s small domestic market of 16 million people into 170 million – with the possibility of Ukraine joining at some point.

Active membership in the Shanghai Cooperation Organization alongside China and Russia and other former Soviet states reflects the desire to maintain close relations with powerful neighbors – while being beholden to none. President Nazarbayev refused to endorse Russia’s de facto annexation of South Ossetia and Abkhazia, for example. But he is a strong supporter of President Barack Obama’s nuclear non-proliferation policies and has opened up Kazakh airspace, roads and railways for U.S. transit to Afghanistan.

Like Switzerland, which remained prosperous and peaceful through countless European wars by being useful and accommodating to powerful neighbors on all sides, Kazakhstan sees itself as an “honest broker” – both in its own right and, on a wider scale. An independent, sovereign Kazakhstan looks here to stay – and the $100 billion of foreign investment it has attracted thus far looks like a vote of confidence.

Anthony Robinson is a former Financial Times Moscow correspondent, and East Europe editor and originator of the Russian business newspaper Vedomosti.

SOURCE: Invest in Kazakhstan, 2010



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