Kazakhstan Chamber of Commerce in the USA

KazCham



It’s time to change the oil-Borate image of Kazakhstan in America 2

Posted on April 26, 2010 by KazCham

United States has been successful trade and economic partner for the countries of Central Asia for many years. However, this partnership was limited mostly to work of U.S. energy companies upon requests of Washington to hand in the operations of coalition forces in Afghanistan. From the other side, it’s extremely difficult to enter the US market for the Central Asian States due to many obstacles.

It’s symbolic that the first country of Central Asia, which opened a representative office of its Chamber of Commerce in the United States (New York City), was Kazakhstan. The head of the representation, Yuliya Daurova, is going to tell about main activities of the chamber and how it is going to revive the Kazakh-American business cooperation.

According to Yuliya Daurova, ROI in Kazakhstan reaches 150%.

– Promotion of the political interests of Kazakhstan has been doing actively for a long time. It includes the current chairmanship of the OSCE and the Organization of Islamic States the next year  – as vivid examples. What about intentions of foreign countries to develop the business and economic cooperation with Kazakhstan? And how can Kazakhstan Chamber of Commerce promote that?


– During the crisis, the interest of American companies to developing promising markets increased. It includes Kazakhstan. The introduction of industrial-innovative strategy by the Government of Kazakhstan has intensified the interest of investment companies and banks in the United States to the country. Thus, major part of requests in our representative office comes from them.

For example, one of the largest U.S. private equity companies believes that its best investment over the past 10 years was a project in Kazakhstan, where the internal rate of return of these investments amounted to 150%, which is a high rate. However, many U.S. companies just want to know more about the economic situation in our country, since they are still afraid of the political and financial risks. Yes, U.S. companies now show interest in Kazakhstan, for example in the agricultural sector and the chemical production, but in my opinion, they are still very cautious.

Thus, we plan to hold regular seminars and conferences which are tailored to target audiences in individual sectors on issues of doing business in Kazakhstan. Seminars are supported by Grata Law Firm (New York), auditing company PricewaterhouseCoopers Kazakhstan, Broad Street Capital Group and, of course, the Embassy and the Consulate of Kazakhstan in the United States.

We have already launched social networks marketing and plan to hold a series of activities to promote the business image of our country in America, because we are often told that  it is very difficult to learn about Kazakhstan. So, we’ll try to change this attitude.

I want to stress once again that there is the interest – both by U.S. companies and by Kazakhstan firms – to conduct joint business. Basically, it’s about joint ventures and export-import operations. But it’s very difficult to contact the right people in Kazakhstan for American companies. They do not know how to do this and fall into an information vacuum.

Our embassy in Washington has been working on this problem over years, but it is over workloaded. So, we hope to become the “business bridge” between our two countries and to provide operational information about projects, legislation and investment climate in Kazakhstan.

– United States companies have been actively working in the republic in the energy industry since Kazakhstan proclamation of independence. What do they do now in this area? And what is the approximate ratio of involvement of U.S. businesses in other areas to oil production involvement in Kazakhstan?

– The United States have invested in Kazakhstan’s economy 14.3 billion (from 1993), mostly in oil and gas industry and commensurate services. Now, U.S. exports to Kazakhstan has fallen to 2005 levels and totaled $ 600 million in 2009, although there was a time when it reached a billion. It includes 40% for equipment for the oil industry, 25% for transportation equipment, and the rest for computers, telecommunications, electronics and chemical industries.

Despite the fact that today some American agriculture, medical equipment, and educational firms are very interested in Kazakhstan market, it seems to me that the current ratio of investment into O&G complex comparing to other areas will not change. Probably, it’ll be the same 65% of U.S. investments on oil, gas and associated transport lines development.

– Do you think that the image of “business background” of Kazakhstan in America has been changed compared to the times when the cooperation just began? Do not you think that Americans, despite their nearly twenty-year presence in the country, are still very poorly informed about Kazakhstan and its real business potential?

– Kazakhstan, oil , Borat – that’s the image of Kazakhstan for the majority of Americans, still. Many U.S. investors react vigorously with the word “oil” in relation to Kazakhstan, but they are still completely unaware of the fact that Kazakhstan is, for example, one of the world’s largest exporter of copper, uranium and grain.

When you tell them that, it is a real discovery. Therefore, the change of country’s image will take a lot of work. I need result as follows: the word “copper” should be associated with the company “Kazakhmys”, aluminum with ENRC and so on.

So far, the general business relations between the United States and Kazakhstan has not been changed. Oil is still in the first place. The Kazakh exports to the U.S. for the crisis year declined only  by $ 65 million and amounted to 1,545 billion dollars. Of course, that was mostly oil. Everything else is mainly ores and metals.

– Energy and its development is the priority area for the United States regarding the cooperation with Kazakhstan. But today Kazakhstan needs money for the development of agriculture, small business and transport industries from U. S. What has been done to bring U.S. companies of non-energy sector to Kazakhstan over the years?

– You know, this is a difficult question. Judging by the fact that most American companies which come to us are investment companies, they are, in principle, interested in launching projects in Kazakhstan. However, the U.S. firms are interested in public-private partnership or joint ventures with local partners. U.S. investors need sound guarantees to work in Kazakhstan.

As I see, American companies usually submit projects to Kazakhstan ministries, and then hope to get any response over the years. I think that if U.S. investors were more knowledgeable about our country, they would contact partner companies directly, and it would certainly accelerate the process. But today American companies get into the information vacuum.

– What are the interests of Kazakhstani business in America? And how representation of your Chamber of Commerce can help Kazakh businessmen to work in the U.S. market?

– Officially our Kazakhstani business in the United States represented by only one company – Wimpex (vodka). However, our oil companies have strong business ties with our American partners, they have their kind of rep. offices, plus Astana airlines reside in New Jersey.

I have met several private investors from Kazakhstan in America. For example, a Kazakh young man opened a glass factory and resold it then. There is a company owned by one beautiful Kazakh lady, which deals with the import of caviar from Kazakhstan to the United States. Our young guys here opened an advertising agency, created a design studio and a model agency.

If we talk about the prospects of Kazakhstan’s business in the United States, there are great opportunities to work with mining companies and grain producers. In America, there are potential buyers of Kazakh uranium, gold and grain. I mean there is a potential for mutual cooperation.

And I think that it exists for small businesses from Kazakhstan too. For example, in such a huge city like New York, there is no a Kazakh restaurant while there are about 10 thousand Kazakhs living here plus two million Russian-speakers. Add here a very active go-out population of other nations, it’ll be approximately 10 million of inhabitants. Here you have an opportunity for our Alasha or Tubeteika.

With specific regard to our work, we are ready to help in finding partners, customers, and co-financing in the United States. Also, we help with registration, immigration and other issues.  So, if you have a good business proposal and a partial funding, it is possible to organize the Kazakhstani business here in the United States.

– What, in your opinion, are the main problems which have prevented the Kazakhstan and American entrepreneurs to interact so far? Is there only problem of the lack of adequate information about each other, or it is more mentality, lifestyle, cultural differences?

– In general, people face several problems: the absence of proper information, the different languages, and the distances between the countries. On the other hand, Chinese and Russian companies work successfully in the United States regardless these problems. Some of them even do not speak English at all and work here for years.

I agree that it happens partly due to the differences in mentality. In my opinion, there are purely social and cultural aspects in the relations between the two countries. For example, the Kazakhs live patriarchal structure, derived from the ancient times, and it is much harder for them to adapt to specific American culture. Americans are, by nature, more open and assertive in their behavior, and it is easier to do business for them. The same dress code, for example, is pretty simple, but something may be unacceptable in the same clothing for Kazakhs. But since we talk about business and not well-established family relations which have thousands years of tradition, so, perhaps, there should be more flexible and less formal relations. Still the main constraint in enhancing the bilateral relations is the lack of timely and reliable information about each other.

– Given the fact that a centralized bureaucracy in the U.S. is extremely strong and it does not solve problems of small business operationally, isn’t it more profitable for you to contact senators of individual states in the country directly, since they are much more flexible in making decisions and will be more interested in helping US companies with investments and projects in Kazakhstan.

– Unfortunately, the bureaucracy stifles business development not only in the United States, but in Kazakhstan as well. Definitely the situation has improved with the arrival of young and dynamic vice-ministers in the Kazakh government, who are easier to reach. They are more open to contact and react more quickly to certain requests.

Yet, the situations with the bureaucratic obstacles remain severe. For example, government people there sent me approved scanned, signed and stamped answers on official forms to my email requests. Businessmen barely do that. They will email me back within 48 hours as usual.

There is also a significant difference in the affairs of government agencies of both countries. For example, in the United States a businessman will receive an answer for an request, sooner or later. It usually takes a couple of weeks, sometimes, two months. Still, the answer will there. Moreover, the higher the rank, to whom you are applying, the more assurance that you’ll get a prompt response in U.S. In Kazakhstan a businessman finds himself in the Bermuda Triangle.

As for senators of states and their interest in cooperation with Kazakhstan, you are absolutely right. We have already established connections with the state of Louisiana in the south of the USA; Nebraska – an agricultural state; Washington on the Pacific coast. We are now working to expand our business ties in California, and also plan to enter into agreements with local business associations in New York.

We are open and glad to various forms of bilateral cooperation, we actively try to help companies to enter and work in both markets and look forward to successful implementation of our plans to strengthen trade relations between the U.S. and Kazakhstan.

SOURCE: Delovaya nedelya Kazakhstana. Yuriy Sigov. 2 April 2010.

Alternative energy 0

Posted on April 10, 2010 by KazCham

The sharp slowdown in economic activity, and especially the steep decline in mining and metals processing, has had the completely unintended benefit of banishing earlier fears that years of under­investment had left Kazakhstan dangerously short of electricity.

Over the first two months of 2009, electricity output declined by 9.7 per cent compared to the same period a year earlier, when the economy was still expanding at close to double digits. With output expected to rise only slowly, the economic slowdown provides a welcome respite for the power companies. It gives them breathing space to start building coal-fired power stations, as at Balkhash, or refurbish older Soviet-era power stations at Ekibastuz and elsewhere.

The decrease in demand for energy also provides extra time in which to complete construction of a north-south extension to the national power grid. This is needed to bring reliable power to the more heavily populated south of the country where the two biggest cities, Almaty and Shymkent, are situated and where most people live. The fragility of the supply situation here was underlined in April when much of Almaty was plunged into darkness by a breakdown in hydro-power supplies from Kyrgyzstan, whose Toktogul hydropower reservoir ran out of water before the end of winter.

Such problems should be eliminated once the first stage of the 3,000km gas pipeline, which will carry up to 30 billion cubic metres (bcm) of Turkmen, Uzbek and Kazakh gas east to China, is completed later this year. The new export line will give a steady and secure supply of gas to the whole of southern Kazakhstan, for the first time.

The new export pipeline to China does not run from south to north, as pipelines did in Soviet days to carry Central Asian gas north to Russia, but from west to east, along Kazakhstan’s southern borders with its gas-rich Central Asian neighbours. While the bulk of gas will be exported to China, up to 10bcm annually will be available for consumption in southern Kazakh homes, power stations and factories.

What remains to be seen is whether the combination of tighter credit and reduced fears of power shortages will slow development of alternative energy sources, which were building momentum before the global crisis struck the Kazakh economy, and especially its power-hungry metals, mining and cement sectors.

AFTER A DECADE of heavy investment to develop the  country’s on- and offshore oil and gas fields and coal -mines, President Nazarbayev has given his backing  to greater investment in non-conventional or  alternative sources of power – for which Kazakhstan  has huge potential.

President Nazarbayev’s interest in improving  alternative energy reflects growing awareness that  Kazakhstan is an under-populated country that  covers a huge area, and that there is in fact great  potential for various forms of alternative energy,  including wind power, solar-panel farms and biofuels. Enormous tracts of marginal farming or steppe  land are potentially suitable for biofuels farming.  Situated far from the oceans, much of the country  enjoys plenty of sunshine, especially in the south,  and constant winds blow virtually unhindered across  thousands of kilometres of flat or undulating steppe,  semi-desert and mountains.

At the moment, most of this potential is untapped,  but that should change once the Majliis, or  Parliament, approves legislation designed to promote  alternative energy and its connection to the grid,  where appropriate. The new interest in alternative energy also fits in with the government’s renewed  focus on rural development and plans to encourage  people to stay in villages and small towns. These can  often be better supplied from locally produced energy than a national power grid, which is focused on  supplying the main towns and industries.

At present, around 80 per cent of all energy  consumed is generated in coal-fired power stations,  with additional contributions from hydropower,  mainly from big dams across the Irtyush river, which  flows west and north for thousands of miles from  China through the northern Kazakh mining belt and  right across Siberia to the Arctic ocean. In the 1990s  Kazakhstan lost around 90 per cent of its hydropower  capacity when smaller plants were shut down.

“Renewable energy can contribute to Kazakhstan’s  energy independence in areas such as north  and south Kazakhstan, which currently import  energy,” says Gennadi Doroshin, head of UNDP’s  Kazakhstan Wind Power Market Development  Initiative. It can provide power to remote consumers,  reduce transmission losses and the need for power  transmission lines.” The UNDP is helping the  government with a national wind energy development ^ programme, which targets 250-300mw of wind  installations by 2015 and up to 2,000mw by 2030.

“Kazakhstan is one of the best countries in the  world for large-scale wind installations because of  the high wind potential and land availability. But  the potential is hardly used. On the Chinese side of  the Jungar Gates border crossing, east of Almaty, for -» example, wind energy stations were set up long ago, h but in Kazakhstan they are still only at the planning stage,” he adds.

Nurlan Djienbayev, director of solar energy  company ND&Co, adds: “Many villages are far from  main energy networks and power is short in many  regions, including Almaty. Solar batteries could  have supplemented the main networks, but we  cannot do this yet because of the absence of the  relevant legislation, this is the main reason for slow  development of alternatives.”

Two big solar projects are already in operation – at  Alakol and Kuldzhinkii – and four more are planned  under the UNDP initiative. But there are also smaller  private schemes set up by oil companies in western  Kazakhstan and in the Almaty region, where the  largest helps power the IT Park free economic zone. n addition, there are a number of projects to  produce photovoltaic technologies, with Germany’s  Thyssen Krupp Manex supplying advanced technology to Silicium, Kazakhstan’s planned silicon metal plant  in Karaganda. Kazakhstan’s Lancaster Industrial  and Kun Renewables are setting up a $390 million  polycrystalline silicon plant in Astana, with finance  from the Investment Fund of Kazakhstan and the  Development Bank.

According to the Ministry of Agriculture,  Kazakhstan also has the potential to produce up to  300,000 tonnes of biofuels annually at around half  he cost of production in western Europe or the US.  “Currently only one biofuel plant is operational. This is the Biochim plant in north Kazakhstan and it cannot  meet demand,” says Beisen Donenov, director general  of the Kazakhstan Biofuels Association, set up in 2007  to develop the industry. “The country’s food security  interests impose limitations on raw material for  biofuels production. Because of a smaller grain harvest h last year, the plant did not operate at full capacity.”

A second plant at Taraz was not operational at time of writing and a third is being built at Novoishimsk.  The latter will be the first ‘next generation’ plant  that uses non-food or agricultural waste products  as raw materials. This is only the tip of a potential  iceberg. Toyota has just signed an agreement with  the Biofuels Association to start developing next- generation biofuels technologies and the association  is also working with several US scientific institutes  with the aim of producing aviation kerosene and  other new-generation biofuels.

Invest in Kazakhstan An official publication of the Government of the Republic of Kazakhstan, 2009. Pages: 69-71.

Kazakhstan: The war for talent has just begun 0

Posted on March 30, 2010 by KazCham

Natalia Kurkchi, Partner – Antal Russia, CIS Development Director

Read in Russian

The unstable economic situation in the world has forced many international companies to search for new markets. The developing countries’ markets have always represented a combination of risk and attractiveness, and Kazakhstan is no exception. Nevertheless the 2010 is already beginning to show positive tendencies on the recruitment market in Kazakhstan and other countries of Central Asia: the number of ‘start-ups has increased, the demand for qualified and experienced specialists and managers from more developed countries has increased, the interest towards Kazakhstan and Central Asia from the M&A companies has also risen. All these and many other facts prove some very serious intentions of both local and international companies to develop in this region in 2010.

The candidate market in Kazakhstan has always been very narrow, both recruiters and employers very often happen to know the same candidates who are open on the market; a lot of people hoped that the economic recession would change this situation for the better. Despite the general expectations and predictions though, it hasn’t brought many highly-qualified specialist for cheaper price on the market – simply because ‘highly quality’ is never ‘cheap’.

Of course, the inflow of candidates on the market has increased significantly over the last 1,5 years: there are now 3-4 times more responses to vacancies than before. Unfortunately we can hardly speak about an increased quality of the candidates’ market: only 1-2 candidates out of 10 get to interview stage. In turn, 80% of mid-to-senior-level managers – who are still working and are still valued by their employers – are simply not considering any other job opportunities and are not open on the market. All this statistics make the opinion regarding ‘employers’ market’ quite questionable.

The employers compensate for the lack of qualified personnel by either head-hunting candidates from the competitors on the local market or attracting candidates from outside of Kazakhstan. There is obviously another way which includes developing your own staff. This is a less expensive way, but it tends to be too long and quite risky: these specialists can be as well head-hunted by the competitors.

Companies operating on the Kazakhstan market continue to open new vacancies. Over 60% of Antal’s clients have quite optimistic views regarding market development in Kazakhstan and Central Asia, and 40% of them are already actively hiring new people. The firing process was in many cases spontaneous and quite drastic during the worst times of the recent downturn. This has led to the situation where a lot of companies found themselves lacking some crucial people within their organisations. Now when the market starts showing signs of growth again, it’s becoming clear that a company simply cannot develop without a highly-qualified team in place.

During 2009 many companies struggled to maintain market share, companies with enough working capital have taken this new competitive advantage to build their businesses at the expense or poorly run ones, filling the gaps. Likewise well run companies now need to look at the availability of the good talent, as the global and domestic economies become stronger we’ll soon see firms competing for a small pool of the best candidates. Now is a good time to review your organization chart.

Main Tendencies on the Kazakhstan Recruitment Market

  • The recent global recession has forced employers to take a different view of the quality of the employees that they hire, as well as prioritising in terms of which of the structures within the organisation need to be reinforced. A good example is the Controlling function – whether it’s Finance, Internal Control, Risk Management or any other departments controlling the company’s activities and setting up limits to prevent the company from too risky or even threatening situations. Sales positions have probably received the greatest attention and development in the last several months – as was said before, no development is possible without professional Sales and Business Development people. The HR function has also developed considerably: it became clear that a proper HR Manager should not be performing only recruitment and admin functions, but should play a very important role in implementing the correct motivation and career plans for staff, thus increasing their loyalty and effectiveness. The role of IT Managers has also risen from a simple knowledge of IT programs to the implementation of the complex IT solutions for the company, data protection, secure storage of information, etc.
  • Replacements of existing employees is another noticeable tendency on the market at present. This current crisis has become a serious reason for companies to replace ‘quantity’ with ‘quality’, even though this sounds rather harsh. Such occurrences were frequent in 2009, and around 30% of Antal’s clients in Kazakhstan are still planning to replace some members of their existing teams with more professional and experienced ones in 2010 who can develop the company faster and more efficiently.
  • The present situation on the market has resulted in serious corrections in salaries from both employers’ and candidates’ perspectives. In spite of the general perception, salaries on the market have not fallen as dramatically as they were expected to. The main change has been not in the salaries themselves, but rather in the candidates’ expectations when moving to another job. In the pre-crisis times candidates would normally expect a pay rise of 50% – sometimes even 100% and more – these expectations have now fallen down to around a 15% – 40% increase on average during tougher times. Of course if talking about people who have lost their jobs, then the situation is considerably different: these candidates would usually be much more flexible in terms of their salary requirements. However, those candidates who are employed and are not actively looking for a job would have no reason to move to another job unless the salary and package are much more attractive.
  • The employment process has changed too: collecting recommendations for selected candidates is now an integral part of the recruitment process while in the past less attention was paid to speaking to referees; candidate motivation is now checked very thoroughly; professional qualifications and personal qualities are now being seriously tested by many companies. All of this is done to make sure the person fits into the organisation well and stays with the company for a long time. In turn, candidates are also paying much more attention to the company’s stability, its strategic plans, their potential career growth within the oraganisation for the next 3 – 5 years whereas before they would have given such matters less thought.
  • Owners of small businesses are re-entering the recruitment market as candidates again. Amongst these were businesses that were founded in 2008 and 2009 by managers who have lost their jobs and whose employers went bankrupt. Naturally some of these business owners have set up their companies deliberately, they continue to develop them and are willing to stay with them for years, but the main task of about 60% – 70% of these companies was to earn some money temporarily while there were not enough jobs on the market. Now as the amount of interesting vacancies is growing, these businessmen are ready to change their ‘private practice’ and become employed again by larger organisations.
  • The interest in non-CIS candidates (mainly from European and North American countries) has grown significantly. The developed markets are ‘overheated’, and experienced people from these countries are looking for new opportunities in the developing markets. Kazakhstan and Central Asia are looked at as very perspective markets for many industries. At the same time, there are not enough qualified and experienced candidates, especially within new developing industries. This gives specialists from the developed market some privilege in terms of experience, as well as a great opportunity to develop their career, although lack of language skills, coupled with potential difficulties in adapting to local culture can present a logistical issue.
  • Oil & Gas, as well as other mining industries have been traditionally very strong in Kazakhstan and Central Asia. The economy in this region is growing wider by developing such industries as FMCG, Retail, Pharmaceutical and others – which is a very positive sign for the economy.
  • Private Equity funds have to be mentioned separately. These companies are now actively growing and hiring top-class experienced specialists from all over the world to bring the best practices into the local market. As many of the Private Equity industry representatives have mentioned, 2010 will give a lot of great opportunities for the M&A activities in Kazakhstan and Central Asia.

Source: http://news.antalrussia.com/2010/02/02/kazakhstan-the-war-for-talent-has-just-begun/?dm_t=0,0,0,0,0

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.

Charles Raether Appointed Mid-Atlantic Representative for KazCham 0

Posted on March 03, 2010 by KazCham

We are proud to announce that Charles Raether, Executive Director of AmLaw Consulting Group, has become our Mid-Atlantic representative to lead and promote the Chamber’s activities in the greater Washington, D.C. area to support and expand U.S. – Kazakhstan business, trade, and investment. The Chamber’s offices in the United States were recently to increase awareness of Kazakhstan investment programs and initiatives of the Kazakhstan government as well as foster commercial ties between U.S. and Kazakhstan firms in a broad spectrum of industry topics.

The Kazakhstan government recently announced more than 160 new economic initiatives totaling more than $44 billion to attract investment and diversify Kazakhstan’s economic base. These signify significant business opportunities for U.S. suppliers, manufacturers, and investors across key economic sectors such as agribusiness, construction, natural resources, and telecommunications.

AmLaw Consulting will be cooperating with the Chamber’s initiatives planned for 2010. A schedule of webinars on business-related topics will soon be released which will be led by various specialists from business and governmental circles from Kazakhstan and the U.S. A major investment conference is in the works to be held in New York later this year as well as an investment event in Kazakhstan.



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