VZCZCXRO0846
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #1810/01 1391258
ZNR UUUUU ZZH
R 191258Z MAY 06
FM AMEMBASSY ALMATY
TO RUEHC/SECSTATE WASHDC 5406
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 1884
RUEHBUL/AMEMBASSY KABUL 0209
RUEHNE/AMEMBASSY NEW DELHI 0345
RUEHAST/USOFFICE ASTANA

UNCLAS SECTION 01 OF 02 ALMATY 001810 
 
SIPDIS 
 
DEPT FOR SCA/CEN MUDGE 
DEPT PASS TO OPIC - BALLINGER 
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER 
DEPT PASS TO AID - EE-PHILLIPS/RUSHING 
TREASURY FOR OASIA/VELTRI 
USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS 
USDOC FOR 6110/ITA/TD/BI/RHALPERN 
ANKARA FOR CFC 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EIND ENRG EPET EFIN KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 30 - 
MAY 13, 2006 
 
 
ALMATY 00001810  001.2 OF 002 
 
 
¶1.  Summary: This information is drawn primarily from the 
Kazakhstani local press, and has not been checked for 
accuracy.  The opinions and policies expressed in this 
report are those of the authors, not the U.S. Government. 
 
--   GOK to Cut Budget Spending 
--   Possible Imbalance in the Labor Market 
--   KazMunayGaz Board of Directors Reshuffle 
--   Kazakhstan to Join Baku-Tbilisi-Ceyhan Soon 
--   Kazakhstan Plans to Export Gas to Europe 
--   Khvalynskoye, Tsentralnoe PSAs Scheduled for end 2006 
--   KazMunayGaz to Buy 50% of Orenburg Plant from Gazprom 
 
GOK to Cut Budget Spending 
-------------------------- 
 
¶2.  The GOK proposed to amend the 2006 state budget by 
reducing planned expenditures from KZT 97 billion 
(approximately $780 million) to KZT 49 billion 
(approximately $394 million).  In the words of Deputy Prime 
Minister Masimov, "this adjustment would not affect social 
development programs, and the budget deficit will remain at 
1.4% of the GDP".  This decision is part of the inflation- 
targeting policy announced recently by the GOK.  In the 
future, the GOK plans to correlate its spending to GDP 
growth.  (Interfax - Kazakhstan, May 4) 
 
Possible Imbalance in the Labor Market 
-------------------------------------- 
 
¶3.  "One of the labor market's problems is an imbalance of 
demand and supply.  The forecast for 2010 shows that by that 
time, Kazakhstan will undergo structural changes in the 
economy and the labor market.  Recent developments in Europe 
showed that failure to respond in a timely manner to 
challenges in labor relations may lead to social 
destabilization," Kazakhstan's Labor and Social Protection 
Minister Karagusova stated in Almaty on April 28.  "This 
high priory issue has to be handled accordingly.  We have to 
train specialists to push forward the programs for 
development of the Caspian shelf, industrial-innovation and 
transportation development," Karagusova concluded. 
(Interfax - Kazakhstan, May 2) 
 
KazMunayGaz Board of Directors Reshuffle 
---------------------------------------- 
 
¶4.  On April 21, Prime-Minister Akhmetov signed a decree 
reshuffling the Board of Directors of the national oil and 
gas company KazMunayGaz.  The new Board includes: Vice- 
Minister of Energy Bolat Akchulakov, Vice-Minister of 
Finance Askar Yelemessov, Vice-Minister of Transport Zhenis 
Kasymbek, Vice-Minister of Economy Marat Kusainov, and 
Presidential Administration Head Adilbek Dzhaksybekov, who 
will head the Board of Directors.  Dzhaksybekov replaced 
Energy Vice-Minister Lyazzat Kyinov in this position.  (Oil 
Review - Kazakhstan, April 28) 
 
Kazakhstan to Join Baku-Tbilisi-Ceyhan Soon 
------------------------------------------- 
 
¶5.  "The agreement between Azerbaijan and Kazakhstan on Baku- 
Tbilisi-Ceyhan (BTC) will be completed in May.  We will do 
everything possible so that our president can sign the 
agreement in June," Kazakhstan's Prime Minister Akhmetov 
said on May 6 during economic forum in Baku.  According to 
KazMunayGaz Managing Director Kabyldin, "mainly Kashagan oil 
will be transported in Baku direction.  The timeframe is 
around late 2008 - early 2009."  Azerbaijani oil running via 
the BTC pipeline will reach a terminal in the Ceyhan port on 
May 27, Project Director of the Turkish section of the BTC 
Geksel said.  A ceremony commemorating this event is 
scheduled for July 13.  (Interfax - Kazakhstan, May 8) 
 
Kazakhstan Intends to Export Gas to Europe 
 
ALMATY 00001810  002.2 OF 002 
 
 
------------------------------------------ 
 
¶6.  Kazakhstan is considering supplying gas to the Baku- 
Erzurum gas pipeline, Prime Minister Akhmetov stated in 
Baku.  In this regard, the GOK is looking at the possibility 
of constructing an Aktau-Baku gas pipeline under the Caspian 
Sea.  "This means that Kazakhstan has an opportunity to 
reach European markets", the Prime Minister said.  The, Baku- 
Erzurum gas pipeline, with a capacity of 30 billion cubic 
meters, will be completed in September.  (Interfax - 
Kazakhstan, May 6) 
 
Khvalynskoye, Tsentralnyoe PSAs Scheduled for end 2006 
--------------------------------------------- --------- 
 
¶7.  Production Sharing Agreements (PSAs) on Khvalynskoye and 
Tsentralnoye oilfields (Russian sector of North Caspian 
 
SIPDIS 
shelf) are to be signed in fall 2006, as reported by Lukoil 
Head Alekperov.  Engineering work is currently being 
undertaken jointly with Gazprom at the Tsentralnoye oilfield 
for the future exploration wells.  Well drilling is planned 
in 2007-2008.  The work on PSAs is performed by Lukoil and 
KazMunayGaz.  (Oil Review - Kazakhstan, May 3) 
 
KazMunayGaz to Buy 50% of Orenburg Plant from Gazprom 
--------------------------------------------- -------- 
 
¶8.  In 2006, KazMunayGaz and Gazprom will operate the 
Orenburg gas processing plant (GPP) on a joint-venture 
basis, KMG Managing Director Meraliyev recently announced. 
The GPP's assets are estimated by Deloitte & Touche at $700 
million.  The plant may eventually process 28 billion cubic 
meters of gas and 5 million tons of condensate. 
Karachaganak oilfield supplies 7 billion cubic meters of gas 
and 3.5 - 4 tons of condensate.  There is also an 
alternative project.  Kazakhstani President Nazarbayev 
recently asked Lukoil, one of Karachaganak's shareholders, 
to consider constructing a gas processing plant at the 
Karachaganak field.  (Oil Review - Kazakhstan, May 3) 
 
ORDWAY