VZCZCXRO9283
OO RUEHAST RUEHBI RUEHCI RUEHLH RUEHLN RUEHPW RUEHVK RUEHYG
DE RUEHTA #1368/01 2121031
ZNR UUUUU ZZH
O 301031Z JUL 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2865
INFO RUCNCIS/CIS COLLECTIVE 0586
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE

UNCLAS SECTION 01 OF 02 ASTANA 001368 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EPET SENV PGOV PREL KZ
SUBJECT:  KAZAKHSTAN - ASTANA CONFERENCE DISCUSSES SULFUR STORAGE, 
TRANSPORTATION, AND SALE 
 
SUMMARY 
------- 
 
¶1. (U) The Kazakhstan-Canada Business Association (KCBA), in 
partnership with Canada's Alberta Sulfur Research Ltd. organized the 
First International Conference on Sulfur Reutilization and 
Sustainable Development in Astana on July 9.  Representatives of the 
Ministry of Energy and Mineral Resources, Ministry of Industry and 
Trade, Shell, Chevron, TengizChevrOil, Agip KCO, the Kazakhstan Oil 
and Gas Institute, the nuclear joint venture Inkai (owned by 
Kazakhstan's national nuclear holding company Kazatomprom and 
Canada's Cameco Corporation), the nuclear joint venture Catco (owned 
by Kazatomprom and France's Areva), and others discussed the 
environmental impact of sulfur, its storage, transportation, and 
utilization, and other regulatory and business issues relevant to 
sulfur.  End Summary. 
 
SULPHUR SOLD TO 24 COUNTRIES 
---------------------------- 
 
¶2. (U) As of January 1, 2008, Tengizchevroil (TCO) was storing 8.4 
million tons of sulfur in open-air storage at the Tengiz oil field. 
In 2007, TCO produced 1.6 million tons of sulfur.  TCO's second 
generation expansion will result in significantly increased sulfur 
production, up to 2.4 million tons per year.  According to TCO Rail 
Transportation Manager Ruslan Davletukayev, of the 2 million tons of 
sulfur sold by TCO in 2007, 40% (approximately 800 thousand tons) 
were sold to Mediterranean countries (Morocco, Israel, Egypt, etc.); 
32% to Russia and other CIS countries; 24% to China; and 4% to 
Kazakhstan.  Sulfur is supplied to 24 countries in one of four forms 
-- granulated, liquid, flake, or lump form.  During the second half 
of 2008, TCO plans to introduce additional granulating equipment, 
thereby increasing the production of granulated sulfur, which is the 
standard form for shipping and the one preferred by customers.  TCO 
also ships liquid sulfur in 300 special heated tank-cars to the CIS 
(mostly to Russia's Balakov Plant).  Flake sulfur is shipped to 
China and the CIS in 700 covered rail wagons.  According to Chinese 
regulations, flake sulfur must be shipped in 50-kilogram 
polypropylene bags, and be granted special shipment permission from 
a lab at the Urumchi railway station.  Sulfur in lumps is shipped in 
standard gondolas (semi-wagons), covered with a special fabric, to 
the CIS, Morocco, Egypt, and other countries. 
 
OFFICIAL CLAIMS OPEN SULFUR STORAGE IS A HAZARD 
----------------------------- ----------------- 
 
¶3. (U) Raushan Sarmurzina, Director of the Petrochemical Department 
at the Ministry of Energy and Mineral Resources, claimed that 
although sulfur is not classified as a toxic element, long-term open 
storage may have adverse environmental effects, including the 
formation of sulfuric acid, sulfur oxidation (decay), and discharge 
of toxic hydrogen sulfide.  (Note: TCO's position is that it takes 
appropriate measures to minimize the risks associated with open 
storage of block sulfur.  End Note.) 
 
¶4. (U) Rita Sagyndykova, Senior Manager of the Kazakhstan Oil and 
Gas Institute (KOGI); Almagul Kushugulova, Director of Genetics and 
Biochemistry Lab at the National Center for Biotechnology; and Paul 
Davis, General Manager of Alberta Sulphur Research Ltd. enumerated 
the advantages of underground sulfur storage over above-ground 
sulfur storage.  Sulfur oxidation is reduced through underground 
sulfur storage.  Moreover, with above-groud storage, controlling 
acid run-off is costly, and to neutralize the effects of exposure, 
sulfur blocks must be coated with some form of coating (including 
acrylics, limestone, breathable membranes capped in soil, or 
spray-on layers).  Similarly, with above-ground storage, sulfur 
block temperatures must be controlled to prevent decay. 
 
¶5. (U) In March 2007, President Nazarbayev called for the creation 
of a National Sulfur Storage Center (NSSC).  According to 
Sagyndykova, the legal aspects of the NSSC must be carefully 
considered because there is no precedent for the establishment and 
operation of such a center either in Kazakhstan or abroad.  The 
Ministries of Energy and Environmental Protection are expected to 
monitor and control NSCC compliance with legislation and 
environmental regulations. The project will be designed by KOGI and 
the tender process for construction and operation administrated by 
the Caspi social-entrepreneurial corporation. 
 
SULFUR UTILIZATION 
------------------ 
 
¶6. (U) Campbell Keir, Managing Director of Shell Kazakhstan 
Development; Aibat Sherikbayev, Acting Chairman of KCBA; Pascal 
Bernasconi, Director of Catco; Serghey Breus, General Director of 
Inkai; and Almagul Kushugulova proposed alternative uses of sulfur 
such as making asphalt, concrete, and micro-fertilizers.  Shell 
specifically has an extensive history of sulfur utilization, working 
for more than 60 years with regional authorities in Canada. 
 
 
ASTANA 00001368  002 OF 002 
 
 
¶7. (U) Sulfur is used to produce sulfuric acid, which is a vital 
component in the processing of uranium.  One processed kilogram of 
uranium requires as much as 50-150 kilograms of sulfuric acid for 
production, and the demand for sulfuric acid is expected to increase 
as Kazakhstan boosts its uranium output from 9,000 tons in 2008 to 
an expected 12,000 in 2009.  During her press interview at the 
forum, Sarmurzina mentioned that Kazatomprom plans to build two 
sulfuric acid plants, one in Kyzylorda Oblast and the second in the 
city of Stepnogorsk in North Kazakhstan Oblast, which are expected 
to respectively process 250,000 and 300,000 tons of sulfur 
respectively annually. 
 
TRANSPORTATION PROBLEMS HINDER SALES 
------------------------------------ 
 
¶8. (U) Most of the speakers acknowledged the challenges TCO 
continues to face regarding sulfur transportation. For example, of 
the 22,500 rail cars TCO owns, 4,300 are used to ship sulfur. 
Sulfur is shipped via one of two hubs -- Alashankou (on the border 
with China), and the Ilyichevsk seaport in the Ukraine.  TCO also 
faces complications with additional shipment requirements posed by 
Kazakhstan's Temir Zholy national railway company.  According to 
Sarmurzina, as much as 3 million tons of sulfur a year could be sold 
if transportation capacity was expanded. 
 
COMMENT 
------- 
 
¶9. (SBU) With sulfur prices at record levels, TCO is effectively 
sitting on $4-6 billion worth of sulfur, and the consortium's sulfur 
sales are becoming an important profit stream, yielding $120 million 
during the first quarter of 2008.  A June meeting between Chevron 
CEO Dave O'Reilly and President Nazarbayev has reportedly produced 
an acceptable compromise on the $300 million environmental fine 
levied against TCO for sulfur storage.  TCO, of course, has 
maintained all along that it received all the necessary permits for 
sulfur production and that no permits are necessary -- or available 
-- for continued sulfur storage.  End Comment. 
 
ORDWAY 
 
 
 
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