08ASTANA354, DESPITE OBSTACLES, KAZAKHSTAN MAINTAINS

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Reference ID Created Released Classification Origin
08ASTANA354 2008-02-20 10:56 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXYZ0001
RR RUEHWEB

DE RUEHTA #0354/01 0511056
ZNY CCCCC ZZH
R 201056Z FEB 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 1815
INFO RUCNCIS/CIS COLLECTIVE 0402
RUEHAK/AMEMBASSY ANKARA 2139
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

C O N F I D E N T I A L ASTANA 000354 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
 
E.O. 12958: DECL: 02/20/2018 
TAGS: PGOV PREL EPET PINR KZ
SUBJECT: DESPITE OBSTACLES, KAZAKHSTAN MAINTAINS 
TRANS-CASPIAN OIL MOMENTUM 
 
REF: ASTANA 338 
 
Classified By: AMBASSADOR ORDWAY FOR REASONS 1.4(B) and (D) 
 
1. (C)  Summary:   KazMunayGas, (KMG) Executive Director for 
Oil Transportation Arman Darbayev expects the Parliament to 
soon ratify the Azerbaijan ) Kazakhstan Inter-governmental 
Agreement on Trans-Caspian transport. KMG is establishing a 
sister company focused on Trans-Caspian transport issues. 
While many questions still surround the Kazakhstan Caspian 
Transportation System (KCTS), Darbayev expects  the pipeline 
to Kuryk and a system of ferrying oil across the Caspian via 
tankers to be up and running by 2011-2012.  End Summary 
 
Kazakhstan Moves Forward on Trans-Caspian Transport Plans 
------------------------------------------ 
 
2.  (C) Arman Darbayev, KazMunaiGas (KMG) Executive Director 
for Oil Transportation and Service Projects, told Poloff on 
February 11 that he expects Kazakhstan,s Parliament to soon 
ratify the Azerbaijan-Kazakhstan Inter-governmental Agreement 
(IGA) on Trans-Caspian transport.  Darbayev admitted that KMG 
is not entirely satisfied with the IGA, for two primary 
reasons.  First, the document,s vague taxation language 
potentially allows Azerbaijan to levy other charges not 
covered by the IGA, such as transit and ecological fees. 
Second, the IGA only covers transportation to the 
Baku-Tbilisi-Ceyhan pipeline, ignoring other possibilities, 
including the use of railroad facilities or other new or 
existing pipelines.  Nevertheless, said Darbayev, Kazakhstan 
cannot turn back on an agreement between presidents. 
 
3. (C) KMG is now establishing a sister company to 
investigate its Trans-Caspian options, according to Darbayev. 
 A fully dedicated staff will focus on the Kazakhstan Caspian 
Transportation System (KCTS), Trans-Caspian transportation, 
and &issues beyond Baku.8 Darbayev called the Azeris 
&lazy,8 and implied that the Kazakhstanis will have to do 
much of the work to develop Trans-Caspian options.   The 
Azeris had BP to push through BTC, said Darbayev, but &now 
there is no one.8 
 
4. (C) Darbayev believes that KCTS will be up and running by 
2011-2012,  with  a pipeline to Kuryk and a system of 
ferrying oil across the Caspian via tankers.  Kazakhstan is 
ready to use smaller ships in the beginning (12,000 TW). He 
suggested, however, that Azerbaijan has generally agreed to 
then move to higher tonnage vessels (63,000 TW), perhaps by 
2012.  Darbayev briefly mentioned another possible 
disagreement between the two countries: Kazakhstan believes 
that the terminal in Kuryk should be used to ship oil in 
multiple directions, creating &flexibility and competition.8 
 
5. (C) Kazakhstan, unlike Azerbaijan, is still willing to 
bring other partners in to KCTS. Chevron is ready for a 
stake, said Darbayev (Reftel).  Other shippers are not 
seeking a share, as long as they receive access and tariff 
guarantees. 
 
Kashagan Consortium Struggles With Its KCTS Strategy 
--------------------------------------------- --- 
 
6. (C) Patty Graham, ExxonMobil Kazakhstan,s General 
Relations and Public Affairs Director, told Poloff on 
February 13 that the Kashagan consortium is still in 
disagreement on KCTS, with Total the biggest obstacle to a 
unified approach.  Total and Eni still want to retain the 
option to use the KCTS to ship some oil south.  As an example 
of the lack of harmony, Graham said that both Total and Shell 
approached Kazakhstan alone to discuss KCTS after all 
Kashagan partners had agreed to only make a joint approach. 
Nick Olds, ConocoPhillips Country Manager, confirmed the 
ExxonMobil ) Total rift and said that Conoco would like 
ExxonMobil to take the lead on KCTS discussions. 
ConocoPhillips is not necessarily seeking an ownership share 
of KCTS but would require some type of protected interest. 
 
Comment 
----------- 
 
7.  (C) With the likely ratification of the IGA with 
Azerbaijan, the creation of a Trans-Caspian unit at KMG, and 
savvy downstream transactions Kazakhstan continues to 
steadily and quietly strengthen its Trans-Caspian options. 
Many questions still remain for Kazakhstan to resolve in its 
relations with both Azerbaijan and the IOCs.  But with 
Tenghiz production increasing, Kashagan output on the 
 
horizon, and Caspian Pipeline Consortium Pipeline expansion 
far from a certainty, the Kazakhstanis have ample motivation 
to find solutions. 
ORDWAY

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