VZCZCXRO9010
PP RUEHDBU
DE RUEHTA #1644/01 1300110
ZNR UUUUU ZZH
P 100110Z MAY 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC PRIORITY 5216
INFO RUEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEHMO/AMEMBASSY MOSCOW PRIORITY 1231
RHEHNSC/NSC WASHDC
RUEHEK/AMEMBASSY BISHKEK 7545
RUEHAH/AMEMBASSY ASHGABAT 6973
RUEHIL/AMEMBASSY ISLAMABAD 2040
RUEHNT/AMEMBASSY TASHKENT 7519
RUEHDBU/AMEMBASSY DUSHANBE 1726
RUEHIT/AMCONSUL ISTANBUL 0727
RUEHBUL/AMEMBASSY KABUL 0196
RUEHSI/AMEMBASSY TBILISI 2203
RUEHKV/AMEMBASSY KIEV 2447

UNCLAS SECTION 01 OF 03 ALMATY 001644 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPARTMENT FOR EB/ESC; SCA/FO (MANN); SCA/CEN (MUDGE) 
DEPARTMENT OF ENERGY FOR GETTO (DOE/SI); BURGESON (DOE/SI); 
WILLIAMSON (DOE/SI); HARBERT (DOE/PI); THOMPSON (PI-21) 
 
NSC FOR MILLARD, MERKEL 
 
E.O. 193056: N/A 
TAGS: PREL ECON ENRG ETRD KZ
SUBJECT: KAZAKHSTAN: A/S BOUCHER MEETS WITH ENERGY MINISTER 
IZMUKHAMBETOV 
 
 
¶1. (SBU) Summary: Kazakhstan plans to build a nuclear power 
plant in order to address energy deficits in the south and 
to expand uranium production, Minister of Energy and Mineral 
Resources Izmukhambetov told Assistant Secretary Boucher and 
Special Assistant to the President Millard.  As oil 
production increases, Kazakhstan is working to expand the 
capacity of both the Caspian Pipeline Consortium and Atyrau- 
Samara pipelines.  President Nazarbayev approved plans to 
sign the intergovernmental agreement with Azerbaijan on use 
of the Baku-Tblisi-Ceyhan pipeline in June.  A new pipeline 
to China is expected to come on line at the same time. 
Izmukhambetov said that Kazakhstan would take Concoco- 
Phillips' interest in the N Block into account.  He 
suggested that WTO members condition Russia's WTO entry on 
agreement on a trans-Caspian gas pipeline.  Finally, 
Izmukhambetov highlighted Kazakhstan's responsible 
management of its oil revenues to support economic 
diversification.  End summary. 
 
¶2. (U) Assistant Secretary for South and Central Asia 
Richard Boucher and Special Assistant to the President 
Elisabeth Millard met with Kazakhstani Minister of Energy 
and Mineral Resources Batkykoz Izmukhambetov on May 5 in 
Astana.  The Ambassador, DTRA chief (control officer), and 
POEC chief (notetaker) also participated. 
 
¶3. (SBU) Assistant Secretary Boucher opened the meeting by 
noting the importance of energy issues to the bilateral 
relationship and the important role played by U.S. firms in 
Kazakhstan.  The U.S. is interested in building upon 
existing cooperation to look at new areas such as the export 
of electricity from Kazakhstan to Afghanistan and Pakistan, 
he commented. 
 
----------------------------- 
Plans for Nuclear Power Plant 
----------------------------- 
 
¶4. (SBU) Izmukhambetov told Boucher that in addition to oil 
and gas, his Ministry was also responsible for electricity 
generation, coal, nuclear energy, petrochemicals, minerals, 
and other sub-surface resources.  Kazakhstan is focused on 
ensuring adequate energy supplies throughout the country. 
At present there are surpluses in the north and growing 
deficits in the south.  The Minister told Boucher that 
Kazakhstan was planning to build a nuclear power plant in 
the near future to address this issue. 
 
¶5. (SBU) Izmukhambetov said that Kazakhstan needed to use 
its uranium reserves, estimated at 20% of total global 
reserves, for power generation rather than just exporting 
ore.  Currently third in terms of production, Kazakhstan 
planned to surpass Canada and Australia by increasing 
production to 14,000-15,000 tons per year.  The Kazakhstani 
government is currently examining various types and models 
of nuclear power plants, he said.  Boucher noted that Amb. 
Saudabayev had raised this issue with him; the U.S. would 
look for ways to cooperate with Kazakhstan, including 
possible Nuclear Regulatory Commission programs on oversight 
and safety.  Boucher noted that President Bush recently 
approved several programs to develop new reactor designs 
that would be safer and easier to operate, in order to 
expand the use of nuclear energy in the U.S. 
 
---------------------------- 
Oil Production and Pipelines 
---------------------------- 
 
¶6. (SBU) At present, 80% of heating is generated using coal, 
according to Izmukhambetov.  Kazakhstan has over 35 billion 
tons of coal reserves, over three trillion cubic meters of 
natural gas, and over 30 billion barrels of proven oil 
 
ALMATY 00001644  002 OF 003 
 
 
reserves.  Izmukhambetov said that total oil reserves are 
estimated at over 100 billion barrels.  Each year Kazakhstan 
extracts 60 million tons of oil; that figure will rise to 90 
million tons by 2010, according to the Minister. 
 
¶7. (SBU) Right now oil is exported through two pipelines, 
the Caspian Pipeline Consortium (CPC) pipeline and the 
Atyrau-Samara pipeline.  Izmukhambetov explained that in the 
long term, Kazakhstan plans to expand the capacity of the 
Caspian Pipeline Consortium route to 60-70 million tons per 
year, and the capacity of the Atyrau-Samara route to 25 
million tons per year.  The Atasu-Alashankou oil pipeline to 
China will come on line in late May or early June, 
Izmukhambetov said; initial capacity will be 10 million tons 
per year, rising to 20 million in the future.  The Minister 
informed Boucher that on May 4, President Nazarbayev had 
approved his proposal to finalize the Baku-Tblisi-Ceyhan 
(BTC) intergovernmental agreement with Azerbaijan in May and 
to sign it in mid-June. 
 
¶8. (SBU) Boucher asked whether agreement had been reached on 
CPC expansion.  Izmukhambetov explained that the main issues 
had been resolved, but Russia was conditioning final 
agreement on Kazakhstani support for the Burgas- 
Alexandroupolis Bosphorus bypass pipeline.  Kazakhstan was 
still waiting for specifics on what the terms of 
participation in the project would be.  Izmukhambetov 
emphasized that Kazakhstan would continue to pursue 
agreement on expansion of capacity of the Caspian Pipeline 
Consortium route, as it was in the interest of both 
Kazakhstan and Russia.  Nazarbayev had told Putin in Moscow, 
however, that if the Russian government would not agree to 
expansion, Kazakhstan would shift the bulk of its oil 
exports to the Baku-Tblisi-Ceyhan and Atasu-Alashankou 
pipelines.  This would leave no room for the volumes that 
Russia wanted to send through the Atasu-Alashankou pipeline. 
 
¶9. (SBU) Boucher asked about Kazakhstan's plans for new 
exploration and development of oil resources.  He noted that 
Conoco-Phillips is interested in participating in the N 
block.  Izmukhambetov said that there were no plans for new 
tenders in 2006.  Kazakhstan would take Conoco-Phillips' 
interest in participating in the N block into consideration. 
 
-------------------------- 
Trans-Caspian Gas Pipeline 
-------------------------- 
 
¶10. (SBU) Izmukhambetov said that Kazakhstan supported the 
idea of a trans-Caspian natural gas pipeline, as it 
presently is forced to sell its gas to Russia "for close to 
nothing."  He noted that he had discussed this idea with 
Secretary of Energy Bodman during the recent World Energy 
 
SIPDIS 
Forum in Qatar.  Izmukhambetov explained that the agreement 
of all Caspian states would be necessary for such a project 
to begin; he suggested that WTO members obtain Russia's 
commitment not to impede the project before signing 
bilateral agreements on WTO accession.  Izmukhambetov said 
that Kazakhstan could export significant quantities of 
natural gas to Europe through such a pipeline.  Boucher 
noted that the U.S. is funding a feasibility study for the 
project. 
 
¶11. (SBU) Izmukhambetov said that during their recent 
meeting in Moscow, President Nazarbayev had asked President 
Putin for a proposal within one month regarding the natural 
gas that is expected to be produced in Karachaganak 
beginning in 2012.  The Minister said that he would go to 
Moscow a few days before Nazarbayev's scheduled May 20 
meeting with Putin to discuss the Russian offer. 
 
¶12. (SBU) Boucher asked Izmukhambetov whether the proposed 
 
ALMATY 00001644  003 OF 003 
 
 
trans-Afghan gas pipeline, which would bring Turkmen gas to 
Pakistan, was commercially feasible.  Izmukhambetov replied 
that the idea made sense from a commercial point of view. 
Kazakhstan was concerned, however, because Turkmenbashi had 
promised to sell the same gas to Russia, China, and now 
Pakistan. 
 
-------------------------- 
Management of Oil Revenues 
-------------------------- 
 
¶13. (SBU) Boucher told Izmukhambetov that the U.S. regarded 
Kazakhstan as a model not only for how it had developed its 
oil sector, but also for the way it managed the oil revenues 
through the National Fund.  Izmukhambetov said that the 
government was proud of having assured the complete 
stability and transparency of all contracts.  He noted that 
Kazakhstan had been among the first to support Prime 
Minister Blair's Extractive Industry Transparency Initiative 
(EITI).  Unlike neighboring countries, Izmukhambetov said, 
Kazakhstan was investing its oil revenues to diversify the 
economy, introduce new technology, and train young people. 
 
ORDWAY