07ASTANA753, KAZAKHSTAN TO BUILD COAL-FIRED POWER PLANT IN THE

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Reference ID Created Released Classification Origin
07ASTANA753 2007-03-28 02:26 2011-08-30 01:44 CONFIDENTIAL//NOFORN Embassy Astana

VZCZCXRO7127
PP RUEHDBU
DE RUEHTA #0753/01 0870226
ZNY CCCCC ZZH
P 280226Z MAR 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 8883
INFO RUCNCIS/CIS COLLECTIVE 0105
RUEHIL/AMEMBASSY ISLAMABAD 2109
RUEHBUL/AMEMBASSY KABUL 0308
RUEHNE/AMEMBASSY NEW DELHI 0437
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEBAAA/DEPT OF ENERGY WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 ASTANA 000753 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
DEPT FOR EB/ESC; SCA/CEN (O'MARA), SCA/FO (DEUTSCH) 
 
E.O. 12958: DECL: 03/26/2017 
TAGS: ENRG EPET KZ
SUBJECT: KAZAKHSTAN TO BUILD COAL-FIRED POWER PLANT IN THE 
SOUTH? 
 
REF: A. 06 ALMATY 602 
     B. 06 ASTANA 899 
 
Classified By: Political-Economic Chief Deborah Mennuti, 
reasons 1.5(b) and (d). 
 
1. (C) Summary:  Spurred by recent analysis forecasting a 
significant electricity deficit in Southern Kazakhstan by 
2015, the Government of Kazakhstan (GOK) has reportedly 
decided to build a 2000 MW coal-fired plant at the southern 
tip of Lake Balkhash.  Energy Ministry sources report that 
President Nazarbayev's mention of the project in his February 
28 Annual Address confirmed that the GOK will follow the 
recommendations of a soon-to-be-released Samruk (the national 
holding company for state-owned assets) study, which ranked a 
Balkhash coal plant ahead of other options -- including the 
construction of a nuclear power plant at the same site -- for 
expansion of the country's generation capacity. On March 7, 
newly-appointed Energy Vice Minister Satkaliyev told Energy 
Officer that the Balkhash plant, along with a constellation 
of planned hydro projects, will greatly enhance Kazakhstan's 
potential electricity exports to the South, and asked to be 
included in future discussions concerning regional 
electricity integration.  While the GOK is still pursuing the 
idea of constructing a nuclear plant in Aktau (Ref A), the 
project may have suffered a setback with Prime Minister 
Akhmetov's departure from office and funding for a 
pre-feasibility study reportedly still awaiting government 
budgetary approval. End summary. 
 
Nazarbayev Tips Scales Toward Balkhash Coal Plant 
--------------------------------------------- ---- 
 
2. (C) Recently-appointed Vice Minister of Energy and Mineral 
Resources Almasadam Satkaliyev told Energy Officer on March 7 
that, in his February 28 annual address to the Nation, 
President Nazarbayev called for the construction of a 
coal-fired combined heat-and-power (CHP) plant at the 
southern tip of Lake Balkhash. (Satkaliyev explained that, 
although the word "Balkhash" had not entered into the 
official transcripts of the speech, Nazarbayev's words had 
been unmistakable.)  Nazarbayev's "instruction," Satkaliyev 
said, anticipated the results of a soon-to-be-released $2 
million, Samruk-sponsored pre-feasibility study which he, 
Satkaliyev, had overseen in his previous job as head of the 
"KEGOC" (electricity transmission) group within Samruk.  The 
Samruk study, he explained, had ranked three alternative 
projects: the Balkhash coal plant; a nuclear plant at the 
same location; and increased coal-fired capacity in Northeast 
Kazakhstan (achieved either by renovation of existing 
facilities or new construction), linked to the South by means 
of an additional (third) high-voltage transmission line. 
 
Coal Instead of Nuclear: Simple Economics...or More? 
--------------------------------------------- ------- 
 
3. (C) On March 16, Yevgeniy Ryaskov, Deputy Director of the 
Energy Ministry's Office for Management of State Assets, 
provided Energy Officer with additional insight into why the 
GOK favors the construction of a thermal plant in Balkhash 
rather than a nuclear plant.  The Kazakhstan Institute of 
Energy, Ryaskov explained, recently completed an influential 
study suggesting that Kazakhstan would face an electricity 
deficit in the South by 2015.  The study, he added, reversed 
the Institute's previous research, which had suggested that 
supply would keep pace with demand through 2025.  The Balkash 
CHP, Ryaskov continued, could be built by 2015 (in 
Satkaliyev's estimation, the plant will generate 500 MW by 
2012 and 2000 MW by 2015), while construction of a nuclear 
plant would take a decade or more.  Thus, Rysaskov concluded, 
it was logical to favor a coal plant over a nuclear one. 
 
4. (C) Satkaliyev hinted that former Prime Minister Daniyal 
Akmetov's departure from office had contributed to a 
fundamental shift among Kazakhstani decision-makers toward 
coal power and away from nuclear power.  In December, while 
still at Samruk, Satkaliyev told Energy Officer that "there 
are no fans of nuclear energy at Samruk," opining then that 
Kazakhstan's future lay with "clean coal" technology.  Asked 
in March what had become of Akhmetov's well-publicized drive 
to advance the nuclear agenda, Satkaliyev replied that 
Akhmetov's program had been "stopped in the pre-feasibility 
 
ASTANA 00000753  002 OF 002 
 
 
stage" of the GOK budgetary process.  The GOK was still 
considering financing a pre-feasibility study for the 
construction of two 300 MW nuclear-powered turbines in Aktau, 
he explained, but the project was "not very advanced or very 
certain."  (As reported in Ref B, the GOK seriously 
considered moving KazAtomProm, the national atomic energy 
company, under Samruk management in late 2006.  Samruk's 
current head of the "KEGOC" group, Esbergen Abitayev, hinted 
to Energy Officer that the move -- which KazAtomProm had 
rebuffed -- had been, in effect, a hostile takeov
er attempt 
by Samruk.) 
 
5. (C) Ryaskov, by contrast, defended the economic 
feasibility of a nuclear power station sited in Aktau. Given 
the prices Kazakhstan currently receives for its natural gas 
on the Russian border ($145 per thousand cubic meters, by his 
estimation), he explained, it would be cheaper, in the long 
run, to build and operate a nuclear plant in Aktau rather 
than continue to generate electricity from gas. 
 
Balkash CHP to Facilitate Kazakhstani Electricity Exports? 
--------------------------------------------- ------------- 
 
6. (C) Satkaliyev told Energy Officer that the forecasts of 
an electricity deficit in the South had been incorporated 
into a new "action plan" for the development of the 
electricity sector to the year 2015, which was currently in 
the GOK approval process.  Satkaliyev explained that the 
document -- which, according to press reports, calls for $15 
billion in near-term electricity investments -- envisages a 
"constellation" of hydroelectricity projects which, anchored 
by the Balkhash CHP, will eventually create an exportable 
surplus of electricity in Kazakhstan's South.  Reminded of 
the USG's initiative to promote regional electricity trade 
and integration, Satkaliyev responded enthusiastically, 
stating that the Balkash project made such a regional outlook 
necessary for the first time.  Satkaliyev added that he 
personally would like to participate in future discussions of 
regional electricity integration. 
 
7. (C) Comment:  Satkaliyev is the first senior Energy 
Ministry official we have met who appears to grasp the 
potential for Kazakhstan of a regional approach to 
electricity generation.  While his track record is still 
short, Satkaliyev's reputation as a market-oriented, 
progressive thinker (and, it is rumored, a Timur Kulibayev 
protege) gives hope that he may bring greater reliance on 
market principles to Kazakhstan's energy policy and be a 
reliable, useful interlocutor on regional issues. End comment. 
ORDWAY

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