Kazakh Energy Minister: Europe Should be Appraised for Its Large Market

Kazakh Energy Minister:  Europe Should be Appraised for Its Large Market

Kazakhstan, Astana / corr Trend corr K. Konyrova / An exclusive interview with Kazakh Energy and Mineral Resources Minister, Baktykoja Izmukhambetov.

Question: Earlier you stated that in June 2007 the operator of Italy's Eni company, which operates the Kashagan project, would officially announce new timelines for the first oil production from the field. However, no media reports have been made so far...

Answer: Eni presented an official letter on 29 June to indicate that oil production in Kashagan had been postponed by additional two years - from 2008 to the second half of 2010. The company explained it with the necessity of additional preparatory work needed for maximum security of the people working and residing nearby, as well as the environmental protection...

This is really a largest ever project worldwide, which is unique for its capacity and complexity. We plan to produce 1.2 - 1.5mln barrels per day, or approximately 70mln tons of oil per year, only from this field. I want to note that Kazakhstan produced a total of 65mln tons of oil last year. Therefore, the Ministry has commenced the study of all data regarding updated project expenditures after it received all documents from Eni.

Question: The shareholders of the Caspian Pipeline Company (CPC) have been negotiating for many years on extension of the pipeline. Several experts prejudice that a compromise will be ever achieved. What is your viewpoint in this connection?

Answer: My position is not so pessimistic. In my opinion, in a recent year and a half an essential progress have been achieved in settlement of disputable issues. When I was beginning negotiations there were some 20 unresolved issues, whilst now we have only 3 or 4.

Question: What is required from Kazakhstan?

Answer: Russia's key requirement is to receive back the funds invested in the project, the so-called loan in the amount of $5.2bln. Kazakhstan's debts comprise some $500mln. Transneft suggested resolving this problem through issue of Eurobonds this year in the sum equal to the amount of the loan. A special commission is considering this proposal.

The second requirement implies establishment of a tariff which will make the pipeline profitable and able of self financing. Thus, in accordance with the project the tariff is to comprise up to $38 per ton. We suggest consideration of the proposals on increase of economic efficiency within expansion of CPC. So, the negotiations are underway...

Question: Kazakhstan has legally joined the Baku-Tbilisi -Ceyhan main export oil pipeline (BTC) even 4 years ago. On the eve of the visit of Azerbaijani President Ilham Aliyev to Astana work over a transport agreement, which is to define the amount of Kazakh oil to run to the world markets via the BTC, has become intensified. What is the concept of this project?

Answer: I can state immediately that as compared to Atirau - Samara and CPC, the transportation via the Baku-Tbilisi will be expensive, because the expenses will be high. At any case, we need the Caucasus route, because the oil production in Kazakhstan will increase sharply beginning from 2010, whereas the capacity of the CPC is limited. Following the commencement of the second phase of the development of the Tengiz field, beginning from 2008 the country will increase oil production by 8-10mln tons and in 2009 to 23-25mln tons following the achievement of full project capacity.

Along with Tengiz, we have other prospective projects: Zhemchuzhina, Atash, Tub-Karagan, Kurmangizi.

Question: When will the first Kazakh oil enter the Baku-Tbilisi-Ceyhan pipeline?

Answer: It will occur no sooner than 2010. By the commencement of the oil production from Kashagan we expect the completion of the construction of the Kazakhstan Caspian Transportation System.

Question: What is the progress in the transportation agreement on BTC?

Answer: The work is carried out in line with schedule. Now the work over the text of Host Government Agreement is underway. Our investors should sign agreement with the governments of Azerbaijan and Kazakhstan. The document should contain all issues: security provision, transport milestones, tariffs ...

Question: One knows, Kazakhstan has no plans to acquire or to build an oil refinery plant abroad ...

Answer: Right. Kazakhstan is viewing several variants on purchase of an oil refinery plant both in the west and in the east. Now we hold talks on several deals in Europe.

Question: There were sounded ideas that entrance to Europe is not so interesting for Kazakhstan. They complain of ecological burden making any operation non-profitable for them...

Answer: This position is not right. Europe should be appreciated for it largest market. They do not have own oil and gas resources. These are well organized countries and they will design everything to make their tax and other regimes reasonable. New projects will appear here every year, ranging from the reconstruction, expansion to the construction of a new ORP ....

Question: It seems realistic for Kazakhstan to carry out a project on the construction of an ORP in the Ceyhan port, which will in future accept up to 50mln tons of Kazakh oil. However, KazMunayGas [national oil company of Kazakhstan ] has received two proposals- one from the Turkish company and the second from its Azerbaijani counterpart SOCAR on the construction of a plant. What party would be more profitable for Kazakhstan?

Answer: As to Ceyhan, it is not worth to build two or three plants in one and same place. To avoid any rivalry, it is planned to unify the efforts of Kazakhstan, Turkey and Azerbaijan. It is more expedient to build one big plant in all three countries. The relevant talks are in underway.

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