08ASTANA40, CPC PIPELINE EXPANSION MOVES FORWARD, BUT

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Reference ID Created Released Classification Origin
08ASTANA40 2008-01-09 11:59 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXYZ0020
PP RUEHWEB

DE RUEHTA #0040/01 0091159
ZNY CCCCC ZZH
P 091159Z JAN 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 1459
INFO RUCNCIS/CIS COLLECTIVE PRIORITY 0354
RUEHAK/AMEMBASSY ANKARA PRIORITY 2117
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0031
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L ASTANA 000040 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
ENERGY FOR EKIMOFF 
COMMERCE FOR HUEPER 
 
E.O. 12958: DECL: 01/04/2018 
TAGS: EPET ENRG ECON PREL KZ
SUBJECT: CPC PIPELINE EXPANSION MOVES FORWARD, BUT 
QUESTIONS REMAIN 
 
 
Classified By: AMBASSADOR ORDWAY FOR REASONS 1.4(B) and (D) 
 
1. Summary: (C) During his December 20 visit to Moscow, 
President Nazarbayev announced that Russia and Kazakhstan 
have agreed in principle to increase the capacity of the 
Caspian Pipeline Consortium (CPC) pipeline.  Arman Darbayev, 
KazMunayGas Executive Director for Oil Transportation, later 
told Poloff that he believes that CPC expansion will occur by 
2011.  Darbayev said that some questions remain regarding 
Kazakhstan's role in the Bourgas - Alexandroupolis pipeline. 
Moreover, even with its expansion the CPC will only meet a 
fraction of Kazakhstan's oil transportation needs by 2015. 
End Summary. 
 
2. (U) After his December 20 meeting with President Putin in 
Moscow, President Nazarbayev announced that Russia and 
Kazakhstan agreed in principle to expand the Caspian Pipeline 
Consortium (CPC) pipeline.  In his public statement, 
Nazarbayev stated that the two countries will increase the 
CPC's capacity to 1.34 million barrels per day from 600,000 
b/d.  Nazarbayev also announced that Kazakhstan would be 
involved in the Bourgas-Alexandropolis pipeline project, 
without giving details, and that oil exports via the 
Atyrau-Samara pipeline will be increased to 500,000 b/d from 
300,000 b/d. 
 
3. (C) Arman Darbayev, KazMunayGas Executive Director for Oil 
Transportation, told Poloff on December 27 that significant 
progress has been made on the four issues hampering CPC 
expansion - increased tariffs, lower interest on the loans 
extended by shareholders to CPC, a debt restructuring, and 
the provision of extra volumes from CPC to the Bourgas - 
Alexandopolis pipeline (BA).  Darbayev believes that CPC 
pipeline expansion will occur by 2011. 
 
4. (C) Darbayev addressed Kazakhstan's involvement in the 
Bourgas - Alexandropolis (BA) pipeline.  Kazakhstan has 
always viewed BA participation and CPC expansion as 
"simultaneous," and Russia "has generally agreed with this." 
Nevertheless, Kazakhstan is "a little confused" by BA, he 
said.  According to Darbayev, Kazakhstan had expected to 
approach Greece and Bulgaria with Russia to discuss the 
pipeline.  Instead, Kazakhstan was left out of the process. 
Darbayev sees "many commercial issues" with BA, particularly 
because most of the oil will initially come from the Tenghiz 
field.  What will Chevron do if they do not have a share of 
BA?, he asked. The TenghizChevroil consortium developing the 
Tenghiz field will not make any guarantees to BA if they are 
only shippers, he said. 
 
5. (C)  Poloff asked Darbayev if Kazakhstan tied CPC 
expansion to its participation in the new Caspian gas 
pipeline from Turkmenistan to Russia.  Darbayev said that no 
connection was made, calling the new gas pipeline "a 
political issue." He added that he had no direct role in the 
gas pipeline talks but that he has examined the agreement, 
which he said "resembles a CIS document."  Asked to explain, 
he said that the document is short on details and may create 
problems in the future. 
 
6 (C) Darbayev also offered a broad overview of Kazakhstan's 
future oil transportation needs.  According to Darbayev, 
Kazakhstan expects to produce 130-150 million tons of oil by 
2015.  They expect to ship 50 million tons via CPC, 15-20 to 
China, 15-20 via Atyrau - Samara, and 50-80 million tons via 
the KCTS (Kazakhstani Caspian Transportation System).  Poloff 
asked Darbayev what Kazakhstan will do if any of the 
pipelines do not meet their envisioned capacity.  Darbayev 
replied that another CPC might be an option, and that a new 
pipeline from Baku is also needed. 
 
7. (C) Comment: Kazakhstan appears to finally have forward 
momentum on CPC pipeline expansion, a key priority for the 
country.  Nevertheless, if current 2015 estimates hold true, 
only approximately 1/3 of Kazakhstan's oil exports will be 
transported via the CPC.  Therefore, while Kazakhstan 
publicly trumpets CPC expansion, private statements by 
President Nazarbayev (he recently told both the Ambassador 
and President Gul of Turkey that Kazakhstan is interested in 
a Trans-Caspian pipeline, while not specifying whether for 
oil or gas) and planned or completed infrastructure 
acquisitions in Romania, Turkey, and Georgia indicate that 
Kazakhstan's oil transit strategy maintains a significant 
cross-Caspian focus.  End Comment. 
 
ORDWAY

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