VZCZCXRO5349
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHTA #0161/01 0191002
ZNR UUUUU ZZH
R 191002Z JAN 07 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 8206
INFO RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE 0002
RUEHAK/AMEMBASSY ANKARA 2008
RUEHBUL/AMEMBASSY KABUL 0289
RUEHNE/AMEMBASSY NEW DELHI 0418
RUEHAST/USOFFICE ALMATY

UNCLAS SECTION 01 OF 02 ASTANA 000161 
 
SIPDIS 
 
DEPT FOR SCA/CEN (O'MARA) 
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, January 1 - 14, 
2007 
 
 
ASTANA 00000161  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. 
 
-- Finance Minister Nominates Deputies 
-- National Holding Company "KazAgro" Created 
-- Kazakhstan Passes Amendments to the Law on Subsoil Use 
-- CITIC Buys Nations Energy's Kazakhstani Assets 
-- 2006 Oil & Gas Production 
 
 
 
Finance Minister Nominates Deputies 
----------------------------------- 
 
¶2.  On January 15, Kazakhstani Minister of Finance Nataliya Korzhova 
announced names of her new deputies: Bakhyt Sultanov and Daulet 
Yergozhin.  Mr. Sultanov, age 35, worked previously as Chairman of 
National Statistics Agency; Mr. Yergozhin, aged 27, was Head of the 
Special Tax Department, Ministry of Finance.  (Interfax - 
Kazakhstan, January 15) 
 
National Holding Company, KazAgro, Created 
------------------------------------------ 
 
¶3.  In December 2006 Kazakhstani President Nursultan Nazarbayev 
signed a decree establishing the KazAgro national holding company to 
facilitate the development of the country's agro-industrial sector 
and make it more competitive in domestic and foreign markets.  On 
January 15, Alikhan Smailov, a former Deputy Finance Minister, was 
named as Chairman of the KazAgro's Management Board. 
 
¶4.  On January 17, Smailov announced that the GOK would contribute 
its shares of seven state companies to build up  KazAgro's 
authorized capital: "Food Contract Corporation," "Agrarian Credit 
Corporation," "Kazagrofinance," "Agriculture Support Fund," "Mal 
Onimderi Korporatsiyasy," "Grain Receipt Guarantee Fund" and 
"Kazagromarketing."  According to Smailov, "The Ministry of 
Agriculture will be fully responsible for 100% of KazAgro stock. 
KazAgro's initial authorized capital consists of KZT 300 million 
[about $2.4 million.4 million] funded by the 2007 budget, but will reach KZT 
80 billion [about $640 million] after the contribution of the 
above-mentioned equity shares."  (Interfax - Kazakhstan, January 
17) 
 
Kazakhstan Passes Amendments to the Law on Subsoil Use 
--------------------------------------------- --------- 
 
¶5.  On January 15, President Nazarbayev signed into law amendments 
to the Kazakhstani "Law on Oil" and the "Law on Subsoil and Subsoil 
Use." The amendments introduce new standards aimed at ensuring 
transparency in the purchase of goods, work and services associated 
with subsoil use activities, as well as new norms which regulate the 
process of granting subsoil use rights and the awarding of 
contracts.  The law defines the State's right to disallow a company 
from participating in a tender competition on the basis of "national 
security" interests.  New norms will obligate contractors to provide 
non-discriminatory work conditions and provide equal pay to local 
and foreign personnel.  These amendments further tighten the GOK's 
application of local content requirements, requiring companies to 
meet local content benchmarks annually, rather than on average over 
the lifetime of a project.  (Interfax - Kazakhstan, January 15) 
 
CITIC Buys Nations Energy's Kazakhstani Assets 
--------------------------------------------- - 
 
¶6.  On October 25, Canadian-registered Nations Energy officially 
announced its intention to sell the company's Kazakhstani oil assets 
(Karazhanbasmunay) to the China International Trust and Investment 
Corp (CITIC) for $1.91 billion.  CITIC Group successfully closed the 
deal on December 30 after it signed an agreement granting the 
national oil and gas company KazMunayGaz (KMG) the option, valid for 
a year, to purchase 50% of Nations Energy's shares for $955 million. 
 (According to Kazakhstani legislation, the GOK has a priority right 
 
ASTANA 00000161  002.2 OF 002 
 
 
to purchase the assets of extractive industries in the Republic 
should such assets be offered for sale.)  Nations Energy operates 
the "Karazhanbas" field in Kazakhstan.  The company produces 50,000 
barrels of oil per day and holds reserves of 340 million barrels. 
(Oil Review - Kazakhstan, January 9) 
 
Oil & Gas Production in 2006 
---------------------------- 
 
¶7.  According to the Kazakhstani Ministry of Energy and Natural 
Resources, Kazakhstan produced 64.9 million tons of oil and gas 
condensate in 2006, 5.5% higher than in 2005, including 59.2 million 
tons of oil (up 7.1%) and 5.7 million tons of gas condensate (down 
8%).  TengizChevrOil produced the largest share, 13.3 million tons 
of oil (down 1.8%).  Other notable production figures include: 
Karachaganak Petroleum Operating - 10.5 million tons (up 1%), 
KazMunayGaz - 9.6 million tons (up 2%), PetroKazakhstan - 3.7 
million tons (up 20.6%).  In 2006 overall gas production reached 
27.2 billion cubic meters, or 2.6% higher than in 2005.  (Interfax - 
Kazakhstan, January 12) 
 
MILAS