Kazakhstan Chamber of Commerce in the USA

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Karachaganak consortium to produce 11 million tons of crude equivalent in 2010 0

Posted on June 01, 2010 by KazCham

(SRI) – Karachaganak Petroleum Operating (KPO) plans to extract 11 million tons of crude oil and gas condensate in 2010, Timur Kulibayev, chairman of the Kazenergy association said.

“Karachaganak Petroleum’s output in 2001 was no more than 4 million tons, while in 2010 it will exceed 11 million tons,” he said, speaking at the 10th summit of the CIS Oil and Gas Summit in Paris.

In 2009 KPO produced 2.295 million tons of gas condensate and 8.607 million tons of oil.

KPO, which is developing the Karachaganak field in western Kazakhstan, is the only major oil and gas project in the country without the participation of the state company KazMunaiGas. The project has been surrounded by controversy in the last months, amid accusations of tax evasion, inflating costs, and environmental violations.

KPO is a jointly owned by U.K.-based BG Group, Italian Eni, both of which hold a 32.5-percent stake, U.S. Chevron, which owns 20 percent, and Russian LUKOil, which has the remaining 15 percent.

SOURCE: http://silkroadintelligencer.com/2010/05/25/karachaganak-consortium-to-produce-11-million-tons-of-crude-equivalent-in-2010/

Kazakhstan May Restrict Corporate Withdrawals to Protect Banks, S&P Says 0

Posted on May 18, 2010 by KazCham

Kazakhstan is likely to restrict corporate withdrawals to keep banks liquid and allow them to recover as the country’s lenders try to restructure about $20 billion in debt, Standard & Poor’s said.

“During the crisis, the government controlled very actively the largest deposits in banks, including incentives for state companies not to withdraw their money,” Ekaterina Trofimova, a Paris-based S&P bank rating director, said in a May 15 interview in Almaty. The state directly or indirectly controls one-third to half of Kazakh bank deposits, she said.

Companies are now seeing that the crisis is passing, and “they want to get their money back,” Trofimova said. “But banks won’t be allowed to collapse in the interest of major companies, including state-owned ones, so the removal of deposits by companies will be careful and coordinated. Withdrawals won’t break the banking system, but they will limit its growth.”

Banks in the former Soviet republic face continued weak asset quality, unreliable funding conditions, and low capitalization for at least two more years, Standard & Poor’s said on April 19. Kazakhstan’s financial industry is still struggling to recover from the failure of BTA Bank, which defaulted in April last year two months after it was taken over by the state-owned National Wellbeing Fund Samruk-Kazyna.

Bank Defaults

Besides BTA, which was the country’s biggest lender before its collapse, Alliance Bank, AO Astana Finance and Temirbank, then controlled by BTA, have also defaulted, leaving about $20 billion in debt to be restructured.

Samruk-Kazyna controls stakes in state-owned energy company KazMunaiGaz National Co., uranium miner Kazatomprom, railway monopoly Kazakhstan Temir Zholy and phone operator Kazakhtelecom. The fund also owns stakes in Kazkommertsbank and Halyk Savings Bank, the two biggest lenders by assets, and controls BTA, Alliance and Temirbank.

New foreign borrowing by KazMunaiGaz and Kazatomprom “reduce the urgency of the problem of a possible reduction of large deposits in local banks,” Trofimova said.

KazMunaiGaz sold $1.5 billion of 10-year notes last month, while Kazatomprom sold $500 million of five-year notes last week, according to Bloomberg data.

Deposit Growth

“It’s disputable that Kazakh banks can base their development strategy on domestic resources, since people’s incomes and savings are relatively small and companies’ liquidity has been largely exhausted by the crisis,” Trofimova said. Kazakh bank deposits will increase 20-25 percent at best this year, and no more than 30 percent in 2011, she said.

KazMunaiGas Exploration Production, the London-traded unit of KazMunaiGaz, keeps most of its $4 billion in cash at accounts with Kazkommertsbank and Halyk, Alexander Gladyshev, the company’s head of investor relations, said by telephone from the capital Astana today. “The company has no problem in financing its current operations and capital expenditure, including payments of dividends,” he said, adding that KazMunaiGas as yet has no need to make “billions in withdrawals.”

Sholpan Mukasheva, a spokeswoman for Samruk-Kazyna, Galym Tumabayev, a spokesman for KazMunaiGaz National Co., and Sergei Nasyrov, a spokesman for Kazatomprom, all declined to comment.

Kazakhstan’s 39 banks held 7.298 trillion tenge ($49.8 billion) in deposits in the first quarter, down from 8.09 trillion tenge in the same period last year, according to the website of the Agency for Financial Supervision.

‘Free Liquidity’

“Kazakh banks have free liquidity of about $12 billion,” central bank Chairman Grigori Marchenko said on April 21. The country will increase reserve requirements for banks if they don’t “invest their excess liquidity in loans” in the first quarter, he said in January.

According to Trofimova, “Kazakh banks don’t have excess liquidity; liquidity is entirely adequate, taking into account its short-term character, the high concentration of deposits and remaining uncertainty in domestic and foreign markets.”

Kazakh banks’ combined loan portfolio dropped to 9.472 trillion tenge last quarter from 10.255 trillion tenge a year earlier, data from the Agency for Financial Supervision show. Banks’ total assets slumped 15 percent in the period to 11.946 trillion tenge, it said on April 23.

Nonperforming Loans

The combined loan portfolio may grow as much as 10 percent this year, and will rise even more in 2011, Trofimova said. Kazakh banks’ nonperforming loans, including those that have been restructured, account for almost 55 percent of total loans, she said, adding that gradual improvement will be seen in the fourth quarter. Nonperforming loans issued by banks excluding the four that defaulted are at just over 40 percent, she said.

Kazakh lenders raised provisions, cash set aside to cover loan losses, to a combined 3.5 trillion tenge, or 37 percent of their loan portfolios, in the first quarter from 1.56 trillion tenge a year earlier, according to the financial watchdog.

The defaulted lenders may recover more than a half of nonperforming loans, while the rest will get back more than two thirds, but only in the two to four year period, Trofimova said.

The economy of Kazakhstan, which holds 3.2 percent of world oil reserves according to BP Plc, grew an annual 7.1 percent in the first quarter, the country’s State Statistics Agency said on May 14.

Economic growth slowed to 1.2 percent last year from 3.2 percent in 2008. The economy grew 10 percent on average each year between 2000 and 2007 as energy and commodity prices rose.

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

SOURCE: http://preview.bloomberg.com/news/2010-05-17/kazakhstan-may-freeze-corporate-deposits-to-protect-bank-funds-s-p-says.html

KazMunaiGaz to Borrow $2 Billion, Considers IPO 0

Posted on April 13, 2010 by KazCham

By Nariman Gizitdinov

April 9 (Bloomberg) — KazMunaiGaz National Co., a Kazakh state-owned energy company, is seeking to borrow as much as $2 billion this year and is considering a share sale within three years as it bids to join the world’s leading oil producers.

KazMunaiGaz plans to invest $4.3 billion this year in production, refining and pipelines, and refinance existing debt, Ardak Kassymbek, general manager for corporate strategy and asset management, said today in a phone interview from Astana.

The capital markets offer a “favorable situation” as KazMunaiGaz’s outstanding bonds trade at “very low rates,” Kassymbek said.

KazMunaiGaz, which accounts for about a quarter of Kazakhstan’s oil output, plans to become one of the world’s 30 biggest oil producers by 2015. The company aims to produce 25 million metric tons of oil by that time from 18.7 million tons last year. The central Asian nation holds 3.2 percent of the world’s oil reserves, according to BP Plc.

The borrowing would help cover $1.2 billion of spending planned this year for Kashagan, the country’s biggest oil field, Kassymbek said. Kazakhstan plans to boost oil output to 100 million tons by 2015 after bring the field online. KazMunaiGaz is equal partners in Kashagan with Eni SpA, Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA, each holding 16.8 percent.

In the next five years, KazMunaiGaz plans to invest as much as $4 billion a year, including from $1.5 billion to $2.5 billion a year for the Kashagan development, Kassymbek said.     KazMunaiGaz also plans to invest $300 million at its Atyrau refinery and $200 million to upgrade Rompetrol, Kassymbek said.

Share Sale

Kazakhstan’s National Wellbeing Fund Samruk-Kazyna, which owns KazMunaiGaz for the state, has considered selling shares in the oil producer in the next two or three years, Kassymbek said.

“An IPO would be an optimal solution for the company to raise additional capital,” although requiring significant work, Kassymbek said.

KazMunaiGaz’s debt may increase to $15.2 billion this year from $14.5 billion last year, Kassymbek said. Earnings before interest, taxes, depreciation and amortization is set to advance about 44 percent to $6.2 billion this year, lowering the debt- to-Ebitda ratio to 2.5, he said.     “We plan to stick to a 2.5 ratio in the future,” Kassymbek said.

The yield on KazMunaiGaz’s $1.5 billion bonds due in 2015 rose 1 basis point to 4.855 percent, after having risen 3 basis points earlier in the day. A basis point is 0.01 percentage point.

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

Last Updated: April 9, 2010 11:07 EDT

SOURCE: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZ3_oHhlOlg8

NCOC and the Kashagan new deal 0

Posted on March 09, 2010 by KazCham

A KEY ELEMENT of the new Kashagan deal thrashed out by oil companies and the government last year is a greater role for the state oil and gas corporation KazMunaiGaz (KMG) after the ‘big four’ (ENI, Exxon-Mobil, Shell and Total) bowed to government demands for KMG to acquire parity in the new North Caspian Operating Company (NCOC), which has replaced the former AGIP-led KCO consortium.

Under the new arrangements, the oil majors agreed to allow their individual stakes to drop to 16.8 per cent as they sold shares to KMG, whose own share more than doubled from 8.3 per cent. This arrangement converts the ‘big four’ into the ‘big five’ and gives the Kazakh state both symbolically important parity status in the country’s greatest natural asset and equal status in decision-making.

At the same time, however, KMG assumed an equal share in the heavy financial burden of financing another five years of project development, with no return on the investment until 2013 and beyond.

But times have changed. Back in 1998 the predecessor of KMG was forced to sell the state’s original stake in Kashagan to Conoco-Phillips and Inpex for $500 million, precisely because the cash- strapped government needed money in the wake of the rouble crisis in neighbouring Russia. But this time China has come to the rescue, thanks to a $5 billion deal in April under which the China National  Petroleum Corporation will take a 49 per cent stake  in the 500 million barrel Mangistau Munaigas (MMG)  oil and gas field on western Kazakhstan alongside  KMG. Under this deal, China gets access to coveted oil and gas reserves and KMG gets development money for MMG and finance to retain its stake in Kashagan.

Campbell Keir, Shell’s representative in Kazakhstan, spelled out just what this burden entails when he  revealed that Shell, which has already invested more  than $3 billion in Kazakhstan, would be investing  some $900 million a year over the next few years,  most of it in Kashagan. But it is also developing the  Pearls field further south, together with the Oman  Oil Company and KMG, and other smaller projects.  Rather more cheerfully, he added that sharply falling steel and other input prices, thanks to the recession,  meant that it should be possible to contain or reduce  costs, which had spiralled at Kashagan and elsewhere  while the global economy was booming.

The new NCOC arrangement essentially boils down to a division of labour agreement between the ‘big five’. ENI will concentrate on bringing the Eskene processing complex on stream, Shell and Exxon will take a much more hands-on role in managing specific operational aspects of the project, together with KMG. Total, meanwhile, will concentrate on the logistical problems associated with building new export capacity and developing new export routes for the 1.5 million barrels a day of oil expected to flow from the field before the end of the decade. The French are particularly interested in the potential for exporting oil and gas south through Iran at some stage, politics permitting. But they are also working on the other large, new export route projects.

These include the KCTS export pipeline corridor between Eskene, Aktau and Kuryk; and building up tanker, and possibly sub-sea pipeline, routes across the Caspian to Baku and on to Ceyhan in Turkey.  Expansion of the CPC pipeline route through Russia is the other main priority – not only for Kashagan, but also for Chevron, BG and ENI, which already have rising oil and gas condensate production to export from their Tengiz and Karachaganak fields and badly need new capacity fast.

Exxon, meanwhile, is now in charge of drilling operations at the three smaller, and shallower, above-salt fields – Aktote, Kairan and Kalamkas – which are contained within the Kashagan concession area. Shell, which sees considerable synergies in  developing the Pearls field together with nearby  Kalamkas, is working closely with KMG on continuing developments at the main Kashagan project, while  ENI’s Agip, having been relieved of its sole operator  responsibilities, is now concentrating on developing  the complex on-shore facilities at Eskene and the  logistics base at Bautino.

The more focused and co-ordinated approach to developing Kashagan came just in time. Negotiations dragged on against the background of sharply rising global oil prices. But by the time the deal was officially announced, oil prices were plunging below $40 a barrel. The price collapse was partially recouped towards the middle of 2009 as oil prices recovered to around $50, but even at these levels all shareholders, including KMG, will be funding Kashagan and other Kazakh projects from much reduced global cash-flows.

The delayed start of production to 2012/2013  also means that the earning life of the 45-year  Production Sharing Agreement (PSA), which set out the tax and other parameters of the deal back in  1997, is eight years shorter than the oil companies  calculated when first oil was due to flow in 2005. In vain, the companies, especially Exxon, argued for a prolongation of the PSA timeframe, under which the entire project will revert to the state in 2042. The government refused.

Having been denied this extension, the best the oil companies can hope for now is that by 2013 global oil prices will have recovered and remain high for the next generation. The government is also -» hoping for such an outcome – because financing the  government’s long-term development plans, and  ambitions to turn Almaty into a regional financial  centre, are all heavily dependent on high and  rising oil and gas revenues from Kasha an – which,  ironically, is also the key to financing growth of a  more diversified economy.

Invest in Kazakhstan An official publication of the Government of the Republic of Kazakhstan, 2009. Pages: 36-37.



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