VZCZCXRO0434
OO RUEHAST RUEHBI RUEHCI RUEHLH RUEHLN RUEHPW RUEHVK RUEHYG
DE RUEHTA #1865 2681116
ZNR UUUUU ZZH
O 241116Z SEP 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3389
INFO RUCNCIS/CIS COLLECTIVE 0642
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS ASTANA 001865 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO TDA FOR DAN STEIN 
ENERGY FOR TYLER TILLER, COMMERCE FOR DANICA STARKS 
 
E.O. 12958: N/A 
TAGS: EPET EINV PGOV KZ
SUBJECT:  KAZAKHSTAN - ATYRAU OIL REFINERY LOOKS TO UPGRADE 
 
¶1. (SBU) Charge and Energy Officer met with Kairat Urazbayev, First 
Deputy General Director of the Atyrau oil refinery, on September 18 
and toured the refinery's processing facilities.  The original plant 
was built in 1936, but was upgraded most recently in 2006.  It is 
therefore, said Urazbayev, both the oldest and the most modern 
refinery in Kazakhstan. Some processing equipment was provided by 
the U.S. in 1945-7 as part of the lend-lease program and the 
refinery underwent a major reconstruction project in the 1970s. In 
1995, the refinery contracted with a U.S. firm, Honeywell subsidiary 
UOP, to rebuild the diesel refinery facility.  UOP supplied 
catalyzers for catalytic reforming and provided technology for 
hydrofining and dewaxing diesel fuel.  The total cost of the rebuild 
-- including equipment made and assembled by Japan's JDC Corporation 
-- was $400 million.  Urazbayev said the Atyrau refinery is eager to 
do more business with U.S. companies and is planning a $1 billion 
modernization project.  According to an unnamed source at 
KazMunaiGas's Trading House subsidiary, which owns 100% of the 
Atyrau refinery, it will take five years and up to $2.5 billion in 
order to bring the Atyrau refinery up to Western European standards. 
 The other two major refineries in Kazakhstan -- in Pavlodar and 
Shymkent -- are also currently undergoing renovation. 
 
¶2. (SBU) In 2007, the Atyrau refinery operated at 70% of capacity, 
processing 3.8 million tons of crude, the highest level in the last 
ten years.  In 2008, they expect to process 4 million tons of crude 
and in 2009, 5 million tons. The customs duty on the export of 
Kazakhstani crude oil has been a boon to business.  As Urazbayev 
said with a smile, "It has had some small positive effect."  (Note: 
The government has justified the crude oil export duty in part by 
claiming it will increase the supply of crude to domestic 
refineries, thereby promoting value-added processing in Kazakhstan 
and stabilizing the domestic price of gasoline.  End Note.) 
Currently, most of the oil the refinery receives for processing 
derives from Kazakhstan's oldest oil producing field, in Uzen; 
additional crude comes from Kusk-Kumkol and Russia. 
 
¶3. (SBU) Over the past several years, the refinery has adjusted its 
product lines to meet European quality standards and World Trade 
Organization commitments.  During Soviet times, 50% of the 
refinery's output was mazut, a low-quality fuel oil used mainly in 
power plants; now mazut makes up less than one-third of the 
refinery's product mix.  When asked about Minister of Energy 
Mynbayev's remarks on September 4 that there is insufficient 
domestic refinery capacity, Urazbayev said the Atyrau refinery has 
no difficulty meeting all of the domestic demand in western 
Kazakhstan for refined products and in fact exports some of their 
finished products to Russia.  When asked about transportation by 
rail, Urazbayev confirmed that they do not have enough railway cars 
and said "we could really use more rail cars." 
 
¶4. (SBU) There are constraints to the plant's ability to expand 
because they are located within the Atyrau city limits, but they are 
considering building a new plant in a new location farther from the 
city center.  Urazbayev said the refinery is eager to offer its 
services to process up to 1 million tons of sulfur from 
Tengizchevroil (TCO) and has sent several business proposals to TCO, 
but has not received a response.  The refinery has one continuous 
gas flare from sour gas separation operations and two other gas 
flare stacks available on standby in case of emergency.  (Note: When 
asked about the Atyrau refinery, Steve Rose, ExxonMobil Kazakhstan's 
General Manager, said it is the biggest polluter in the oblast and 
he "wouldn't touch it with a ten-foot pole." End Note.) 
 
MILAS