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DE RUEHTA #0862/01 1391042
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O 191042Z MAY 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5448
INFO RUCNCIS/CIS COLLECTIVE 1603
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RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1536

UNCLAS SECTION 01 OF 02 ASTANA 000862 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EPET EINV IR KZ
SUBJECT:  KAZAKHSTAN:  SMALL OIL COMPANY HOPES TO MAKE IT BIG 
SOMEDAY 
 
ASTANA 00000862  001.2 OF 002 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On May 14, the Chief Executive Officer of 
Canamens, an independent oil and gas exploration and production 
company with headquarters in London, briefed the Charge on the 
company's plans and activities in Kazakhstan.  Canamens does not 
currently own or operate any producing assets in Kazakhstan, but it 
does own 32.5 percent of the Ravninnoe Contract Area and 35 percent 
of the BNG Contract Area and is conducting appraisal work at both 
sites.  Kazakhstani company Roxi Petroleum LLC, registered on the 
London Stock Exchange, is the majority shareholder in both projects. 
 Canamens' biggest concerns in Kazakhstan are macroeconomic 
stability, the government's cash position, the lack of a transparent 
gas market, and insufficient crude oil transportation capacity.  END 
SUMMARY. 
 
TWO BLOCKS EAST OF TENGIZ 
 
¶3.  (SBU) Ravninnoe is located onshore in Atyrau oblast, 100 
kilometers east of the supergiant Tengiz oil field, and covers 121 
square kilometers.  Initial reserve estimates on the Ravninnoe 
field, as reported by McDaniel and Associates Inc., are 3.7 million 
barrels.  The BNG field is located in Mangistau oblast, 40 km from 
Tengiz, and covers approximately 1,560 square kilometers.  On May 
18, Canamens agreed to pay a maximum of $50 million towards the BNG 
work program, which will cover planned work commitments on the 
contract area for 2009 and 2010.  As much as $27 million of this 
initial investment will be spent in 2009 on seismic testing and 
appraisal drilling, with the remainder earmarked for 2010.  Canamens 
CEO Greg Coleman (protect throughout) said it is still too early to 
predict production volumes from the two fields, but he expects 
combined production to be approximately 100,000 barrels per day. 
 
PIPELINES SQUEEZE SMALL PRODUCERS 
 
¶4.  (SBU) Unlike the major international oil producers in 
Kazakhstan, Coleman said his company would like to market the gas it 
produces, rather than reinjecting it, but he complained that Gazprom 
and the oblast government exercise monopoly control over the gas 
market and would not offer a fair market price for the gas.  He also 
said that oil transportation capacity is constrained in Kazakhstan 
and export options are limited.  "We'll have to heavily discount for 
that," Coleman said, noting that Canamens will most likely export 
its crude oil through Russia, via the Atyrau-Samara or Caspian 
Pipeline Consortium (CPC) pipeline.  Coleman added that Canamens 
will be able to justify exploration and production costs, even if 
oil prices fall "slightly below" $50/barrel. 
 
ROXI CEO PREVIOUSLY ARRANGED OIL SWAPS WITH IRAN 
 
¶5.  (U) The CEO of Roxi Petroleum, Rob Schoonbrood, age 62, has 40 
years of energy sector experience, primarily in oil and gas 
exploration and production.  He spent the first 30 years of his 
career with the Royal Dutch Shell Group and held a variety of 
positions, including Business Development Manager of Oil Products 
East for Shell International Petroleum Company in London and Chief 
Executive of Shell Markets Middle East in Dubai.  He left the Royal 
Dutch Shell Group in 1999.  Since then, he has acted as an 
independent business consultant to a variety of companies in 
Kazakhstan.  He initiated and implemented a crude oil swap agreement 
between Kazakhstan and Iran on behalf of CJSC Munai Impex and acted 
as a senior advisor to the management of PetroKazakhstan, with an 
emphasis on business with Iran, Kazakhstan and China.  From 2002-03, 
he was President of Unioil AG, an independent oil transport and 
trading company with niche business around the Caspian Sea, and from 
2004-05, he was Operations Director of Cobalt Energy Group, a 
U.S.-based wholesale company. 
 
¶6.  (SBU) COMMENT:  Consistent focus on the world's largest 
companies developing some of the world's largest oil and gas fields 
can skew one's perspective.  Speaking with smaller companies such as 
 
ASTANA 00000862  002.2 OF 002 
 
 
Canamens can help to restore that perspective and also reveal new 
truths about investing in Kazakhstan.  Not that the ambitions of 
Canamens are all that small.  To provide context, if Canamens is 
able to produce 100,000 barrels per day as expected, that would put 
them in the neighborhood of the total daily oil production of 
Uzbekistan or Romania.  Unlike the major international oil companies 
operating in Kazakhstan, Canamens would prefer to market its natural 
gas commercially, rather than reinjecting it to maintain pressure 
for oil production.  Canamens CEO Coleman called reinjection 
"wasteful" and lamented the fact that Gazprom and KazMunaiGas have 
monopolized the gas market in Kazakhstan.  He would clearly like the 
opportunity to sell the gas rather than pumping it back into the 
ground, but he said if Canamens cannot get a decent price for it, 
they will have no choice.  In addition, as a smaller company with 
fewer assets and less leverage, Canamens is more susceptible to 
sudden shifts in the investment climate and macro economy.  Coleman 
said he worried, for example, that the government would "ask to 
borrow money" or require the company to make unexpected 
contributions to the budget.  While these are issues that would 
concern all foreign investors, it was obvious that Canamens would be 
less able to withstand pressure of this sort than large IOCs such as 
ExxonMobil.  END COMMENT. 
 
MILAS