Kazakhstan in world news" decenber, 2007 — january, 2008

Economic policy of RK in 2008
Specialists’ forecasts shows that real GDP in 2008 will be more than seven percent with inflation to be kept within a limit of 10 percent, which is part of the world crisis, the government said, with which Kazakhstan is connected to and is therefore exposed to its fluctuations and changes.
According to the National Bank chairman’s forecast, despite difficulties, Kazakhstan has fairly good prospects for 2008 as its basic macro-economic parameters remain favourable.

Government builds up basic food and oil reserves
Astana, Jan 9, Khabar-IRNA — The government intends to take a series of measures in the food and oil products market. In a bid to stabilize bread prices memorandums, which city administrations had sealed with the Grain Union, will be extended until autumn.
These agreements provide for extra fixed-price wheat deliveries to the regions.

Kazakh government seeks to double its stake in Eni-led oil project
Bloomberg News, Reuters
December 25, 2007
Kazakhstan is seeking to more than double its stake in the Kashagan oil project, led by the Italian company Eni, as compensation for delays and cost overruns, a government official said Tuesday.
The government of the Central Asian country wants to raise its stake to 16.8 percent, said Dinara Shaimardanova, an aide to the energy minister, Sauat Mynbayev, by telephone from the Kazakh capital, Astana.
The state holds 8.3 percent through KazMunaiGaz National, the oil producer it controls.
The government has demanded a larger share of Kashagan to compensate for delays that it says might extend the time for the country to see returns by up to 11 years. In July, it rejected a second postponement to the start of production, as well as an increase in development and running costs that it says have more than doubled to $136 billion.
On Monday, Mynbayev said that Exxon Mobil was the only company from the consortium overseeing the field that had not agreed to lower its interest in the project in favor of Kazakhstan’s state-owned oil company.
The government and the consortium have extended talks on resolving the dispute until Jan. 15, after missing a Dec. 20 deadline.
Exxon said last week that it was not against cutting its stake, but had its own ideas on valuing the deal.
Exxon is seeking an «amicable solution on the appropriate value for the equity,» Gantt Wilson, a spokesman for the Exxon, said Friday.
Mynbayev said that Kazakhstan did not like Exxon’s offer. «Such an approach bears risks for the project,» he said.
Eni, Exxon, Total and Royal Dutch Shell all hold 18.5 percent of Kashagan, while ConocoPhillips has 9.3 percent. KazMunaiGaz and Inpex of Japan each own 8.3 percent.
The Caspian Sea field is at the heart of Kazakhstan’s ambitious plans to triple oil output by 2017. It is due to start pumping oil in 2010, instead of the original 2005 target.
Events surrounding development of the Kashagan field have raised concerns among foreign investors that the government may be following the lead of other countries like Venezuela, which have tightened their grip on oil resources as it surged toward $100 a barrel.
Amid the current dispute, the Kazakh government has brought in laws enabling it to unilaterally cancel contracts with oil companies on national security grounds.

Kazakhstan calls off search for miners missing in coal mine blast; death toll at 30
The Associated Press January 13, 2008
Rescuers called off the search for dozens of miners missing two days after a deadly coal mine explosion in central Kazakhstan, saying Sunday there was no chance of finding them alive. Authorities put the death toll at 30.
Rescuers recovered seven bodies after the methane gas explosion Friday some 1,640 feet underground but a fire that swept through the mine left no hope of finding 23 others, Emergency Situations Minister Vladimir Bashko said Sunday.
He said crews would have to wait until the fire burns out to retrieve the victims’ remains.
Another 14 miners were hospitalized with injuries, many of in grave condition, emergency officials said.
The cause of the explosion wasn’t immediately clear, Bashko said. Prosecutors have launched a criminal probe into possible safety violations at the Abay mine in the central Karaganda region.
Regional authorities declared three days of mourning.
The Abay mine is one of eight in Kazakhstan owned by the world’s largest steel-maker, Luxembourg-based ArcelorMittal SA. The mines are part of a complex that includes the Temirtau smelter, one of the world’s largest steel plants.

Russia signs pipeline deal in Central Asia
Associated Press December 20, 2007
Desperate to meet growing domestic and European demand, Russia signed a major deal Thursday with the Central Asian republics of Kazakhstan and Turkmenistan to build a natural gas pipeline along the Caspian Sea, a move that could strengthen Russia’s monopoly on energy exports from this region, analysts said.
The deal was signed in the Kremlin by President Vladimir Putin of Russia and President Nursultan Nazarbayev of Kazakhstan during a conference call with President Gurbanguli Berdymukhamedov of Turkmenistan.
Rich in energy resources, both Kazakhstan and Turkmenistan have been wooed by Russia, the United States and the European Union, all of them competing to obtain access to the region’s gas fields.

Western oil companies settle dispute over Kazakh oil field
January 14, 2008 New York Times
A consortium of foreign energy companies has resolved a dispute over Kazakhstan’s giant Kashagan oil field by agreeing to pay the government a bonus of up to $4.5 billion and to transfer 8.5 percent of the project to the national oil company of Kazakhstan.
The big payout, not foreseen in the original 1997 contract, was the latest by oil companies to governments in oil producing regions. They are demanding ever larger shares of the profits at a time of record high oil prices.
Still, oil analysts suggested that the consortium, currently led by Eni of Italy, might have dodged a bullet, considering the mounting bargaining power of petroleum states with oil nudging close to $100 per barrel. Analysts put the total cost of the concession agreed to Sunday at between $4 billion and $6 billion, including the sale of the 8.5 percent stake to KazMunaiGaz at a below-market price, compared to estimates of future earning at above $30 billion annually from the field, which is one of the 10 largest in the world.
Officials in Kazakhstan said that the money would go to education, health care and infrastructure. That suggested a Venezuelan-style populist touch to justify the government’s demands on foreign oil companies, something new in Kazakhstan, a U.S.-ally in Central Asia, which has been seen as critical for the success of Western-backed pipeline plans in the region.
«The shareholders of the national oil company are 15.6 million people of Kazakhstan,» Maksat Idenov, a first vice president of KazMunaiGaz, said in an interview by telephone. «We have to deliver value to all of them.»
The deal resolves a six-month dispute over the big oil field, a huge oil deposit 3.5 miles underneath the Caspian Sea and the largest new oil find in the world since the 1970s. Located 40 miles offshore, Kashagan has recoverable reserves of 13 billion barrels of oil. It is crucial to the West’s aspirations to diversify oil supplies outside OPEC.
With so much at stake, the Kazakhstan government justified its demand for more money by pointing at a mammoth cost overrun — the consortium’s estimated cost to develop the field rose from $57 billion to $136 billion, cutting into the government’s take, in spite of the high oil prices. Also, officials pointed out, the field was first scheduled to come online in 2005. The consortium has paid fines to delay it until 2010.
The consortium paid a fine to delay the start until 2008, then 2010, citing the difficulty of ice flows on the winter sea, the high levels of lethal hydrogen sulfide gas in the oil and the intense geological pressure of the deposit. On Sunday, the companies and government agreed to delay the opening again, until 2011. Some in the industry call the field among the most challenging around, setting aside the troubles with the Kazakh authorities.
In November, in the midst of the talks, Kazakhstan’s parliament passed a law allowing the government to abrogate oil contracts, unnerving the companies. The government also threatened fines for environmental damage, recalling a tactic used by the Russian government to force Royal Dutch Shell to renegotiate an oil and gas project in Siberia. Still, for a time, Exxon Mobil held out on the government’s demands.
But by late Sunday, all executives including Rex Tillerson of Exxon Mobil had agreed to cede a portion of the project to KazMunaiGaz, which proclaimed in a statement a «successful end to the long and difficult negotiations.»
Industry experts say that Eni was originally chosen to lead the project as a compromise between Exxon and Shell, which both lobbied heavily to become the operator. Reports from within the consortium indicated that the partners are dissatisfied with Eni. Included in the deal Sunday, a new operating company formed by all the main foreign companies — Exxon Mobil, Royal Dutch Shell, Total of France and Eni — will take over once the field goes into production.
Under the deal, the companies agreed to pay additional royalties, after the first oil is produced in 2011, ranging from $2.5 billion to $4.5 billion, depending on the price of oil at the time. The companies will also pay a one-off bonus of $300 million. KazMunaiGaz will raise its stake from 8.33 to 16.81 percent, equal to the other principal partners, and compensate the group $1.78 billion.
Estimates varied on the loss from this sale. Citibank, in a research note Monday, estimated KazMunaiGaz underpaid by $1.5 billion, but called the deal better than expected.
«We argue that given the overhang that has persisted with the well-publicized troubles of this field, resolution may provide some ground for relief for Eni,» the note said.
 
Court hands former son-in-law of Kazakh leader 20-year sentence in absentia
The Associated Press January 15, 2008
AKazakh court on Tuesday sentenced the estranged former son-in-law of President Nursultan Nazarbayev in absentia to 20 years in jail for kidnapping and extortion.
The sentence is the latest chapter in the fall from grace for Rakhat Aliyev, a former deputy foreign minister who is accused of abducting two senior managers of a bank he controlled early last year.
Almaty’s Almalinsky District Court also found Aliyev guilty of stealing property and cash from safe deposit boxes held at the bank, Nurbank.
Aliyev was named ambassador to Austria in February after he was accused of the abduction. In May, he was dismissed from the post in May after he publicly accused Nazarbayev of a «retreat to the totalitarian Soviet past» and said he would run for president in 2012.
He was later divorced from Nazarbayev’s eldest daughter Dariga, who is widely viewed as a potential successor to the 67-year-old president.
Aliyev was arrested in Vienna on June 1 on an international warrant, but Austria has so far rejected Kazakhstan’s extradition requests and Aliyev has requested asylum.
He has described the accusations leveled at him as part of a state-organized plot.

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