08ASTANA871, AKTAU: A CENTRAL HUB FOR THE CASPIAN REGION

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Reference ID Created Released Classification Origin
08ASTANA871 2008-05-06 09:56 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO6211
RR RUEHLN RUEHVK RUEHYG
DE RUEHTA #0871/01 1270956
ZNR UUUUU ZZH
R 060956Z MAY 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 2346
INFO RUCNCIS/CIS COLLECTIVE 0502
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 04 ASTANA 000871 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN M. O'MARA 
ENERGY FOR EKIMOFF 
COMMERCE FOR HUEPER 
 
E.O. 12958: N/A 
TAGS: PGOV PREL KZ EPET
SUBJECT: AKTAU: A CENTRAL HUB FOR THE CASPIAN REGION 
 
1. (SBU) Summary: Aktau, situated on the Caspian coast and 
the capital of Mangystau Oblast, is poised to become 
Kazakhstan's next boomtown.  With four major ports in 
operation or under construction and improving road and rail 
infrastructure in Mangystau Oblast, Aktau is perfectly 
situated to become a key Caspian transportation hub. Revenue 
from oil and gas, while already a major earner for the city 
and the oblast, is likely to only increase with the 
development of "N" block and the Zhemchuzhina field.  Several 
other significant projects are also underway in the region, 
including the construction of a new downtown in Aktau which 
will double the size of the city ("Aktau City" with a 
projected ultimate cost of $38 billion) and the creation of a 
major resort complex, with 23 hotels and a new international 
airport. End Summary 
 
Aktau Dreams Big 
---------------- 
 
2. (SBU) On April 23, Poloff traveled to Aktau for three days 
of meetings with government officials, NGO representatives, 
and business leaders.  Aktau, located on shores of the 
Caspian and the capital of Mangystau Oblast, was only settled 
in 1961 and shows signs of its youth.  The city's streets are 
not named, and camels still roam free on the road between the 
airport and the city.  However, new construction projects are 
visible throughout the city.  Property prices are not far 
below those in Astana and Almaty.  Expats crowd bars with 
names like "Guns and Roses" and "The Shamrock."  Iran, 
Azerbaijan, and Russia have all already opened consulates in 
the city. 
 
3. (SBU) Poloff met with Oblast officials on April 24 to 
discuss development plans for the city and the region.  The 
officials began by citing a number of statistics in support 
of the Oblast's important place - the second highest GDP of 
any region, trailing only Atyrau Oblast, a 4.4 percent 
population growth rate (compared to the country's 1.1), 
67,000 applications for land plots, more than Astana's 
62,000, the third highest investment rate among the oblasts, 
a growing manufacturing sector.  The officials highlighted 
several important non-extractive industrial projects, 
including the establishment of an ammonium carbamide complex 
which will provide up to 10% of the world's market 
fertilizers and two new cement factories which will create 
900 jobs. 
 
4. (SBU) The Oblast officials then discussed the region's 
biggest priority, the "Earth - Sea - Sky" integrated 
investment project.  The project has seven main components: 
1) expansion of the Aktau Seaport; 2) development of Kuryk 
seaport and Kuryk working settlement; 3) establishment of the 
Caspian Energy Hub; 4) construction of "Aktau City"; 5) 
creation of the Caspian University of Technologies and 
Engineering; 6) improvement of transport infrastructure; 7) 
development of tourist infrastructure. 
 
An Emerging Transport Superhub 
------------------------------ 
 
5. (SBU) A first priority is to make the Oblast, with Aktau 
at the forefront, the center of Caspian transportation.  The 
oblast has three ports (Aktau, Bautino, and Kuryk), and 
another one planned (Sartas). Poloff visited the Aktau Port 
and was told that an expansion project is underway to 
increase the capacity of the port's terminals from 12 million 
to 20 million tons of oil.  The size of the port has grown 
from 227 hectares to 900 and further expansion will increase 
the size to 2000 hectares.  Kuryk, two hours from Aktau by 
car, is set to be the biggest port in Kazakhstan and of 
significant importance for producers after the completion of 
the Eskene - Kuryk oil pipeline. 
 
6. (SBU) Kuryk will also be the fleet base for an expanding 
Kazmortransflot.  Serik Ishmanov, Managing Director of 
Kazmortransflot, told Poloff on April 24 that Kazmortransflot 
currently has three 12,000 ton tankers and plans to buy three 
additional tankers in the near future.  Kazmortransflot 
ultimately intends to move to 60,000 ton tankers, he said. 
Currently, the company is chartering 10 million tons of oil a 
year, with three million to Azerbaijan, one million to Iran, 
and the rest to Russia.  Shipments to Iran are decreasing. 
Kazmortransflot is also looking to expand its base of 
operations, looking at options at "Batumi and beyond." 
Finally, he informed Poloff that Kazmortransflot is 
completing a feasibility study on LNG transport. 
 
ASTANA 00000871  002 OF 004 
 
 
 
7. (SBU)  Oblast officials told Poloff that they also believe 
that the region will be the focal point for both north- south 
and east-west road and rail traffic.  The first link of a new 
road network between Aktau and Atyrau, the capital of Atyrau 
Oblast and the center of Kazakhstan's oil industry, has been 
completed, and construction of the final link is planned. 
Plans are being developed to build a rail line between Aktau 
and the Bautino port.  Kazakhstan, Turkmenistan, and Iran 
signed an agreement to
build a railway line traversing the 
three countries. As Kazakhstan's east-west transportation 
system is strengthened, oblast officials believe Aktau will 
be an important transfer point for goods from China. 
 
 
Energy Potential 
---------------- 
 
8. (SBU) Mangystau Oblast has a number of established oil 
fields and several potentially significant finds still to 
come on line. The government made an initial estimate that 
the "N" Block not far off-shore from Kuryk has 349 million 
tons of oil, although KazMunaiGas has recently claimed that 
the figure is higher. Shell (55%), KazMunayTeniz (25%) and 
Oman Pearls (20%) hold stakes in the off-shore Zhemchuzhina 
oilfield, with estimated reserves of 100 million tons of oil. 
On April 25, Poloff met with representatives from Caspi 
Meruerty Operating Company (CMOC), the developer of the 
field. CMOC Deputy Manager Bulat Jumagaliyev  Jumagaliyev 
reported that CMOC drilled the first of four wells last year 
and is pleased with the results.  A second well will be 
drilled this year. Asked about the field's potential, 
Jumagaliyev laughed and said, "10 times less than Kashagan," 
Becoming serious, he then said that Zhemchuzhina has many 
advantages in comparison with other offshore fields, because 
of the high quality of the oil and cheaper production costs. 
 
9. (SBU) On April 24, Poloff met with MangistauMunaiGas (MMG) 
Director General Sagyn Krymkulov. MMG, owned by Central Asia 
Petroleum of Indonesia, has 6,000 employees and is one of the 
largest oil producing companies in Kazakhstan (Note: KMG is 
finalizing the acquisition of a 72% stake of the company). 
Krymkulov told Poloff that MMG has 15 fields with 1 billion 
tons of reserves.  Currently, the company is producing 5.7 
million tons per year but hopes to increase to 6 million tons 
by 2011.  MMG also has two offshore blocks, but has no 
drilling experience.  Krymkulov bemoaned the difficulty of 
finding capable Kazakhstani engineers, a theme echoed by 
Caspi Meruerty Operating Company (CMOC) and other oil 
companies in Aktau. 
 
10. (SBU) Several oil company representatives working in 
Mangystau Oblast told Poloff that they are facing increasing 
scrutiny from the government, mirroring a trend in other 
oil-producing regions of Kazakhstan.  Andrey Zimin, the 
Acting Director General of Arman JV (50% Shell, 25% Lukoil, 
25% Mittal; the Arman field has 200 million tons of proven 
reserves) told Poloff that Arman paid $1 million in 
environmental fines last year.  Zimin said they now receive 
two letters a day on average from the Ministry of Energy and 
Natural Resources with various requests. The latest 
requirement, he said, is to station a squad of 20 fireman at 
the field, which he called ludicrous when they only have 35 
employees working there. Hue Huiping, General Manager of 
Buzhachi Operating(Owned by Chinese National Petroleum 
Company (CNPC), Mittal, and Lukoil, developing the North 
Buzachi field, with 23 million tons of proven reserves), 
described a "difficult atmosphere in which to work." He told 
Poloff it is increasingly difficult to get necessary permits. 
 Although Buzhachi will not be affected by a new oil export 
tax, Huiping said that "one way or another, we will have to 
pay." 
 
11.  (SBU) Oil will not be the only energy source emerging 
from Aktau.  On April 24, Poloff met with officials at the 
Mangyshlak Atomic Energy Complex, home to three heat and 
power plants and the decommissioned BN-350 nuclear reactor. 
Poloff asked the officials about recent reports that a new 
nuclear power plant would be built at the facility. They 
responded that they were "99% certain" that the plant would 
be built.  The plant would produce enough electricity to 
support Kazakhstan's growing needs and to provide exports to 
Turkmenistan. 
 
12. (SBU) Underlining its potential for further growth in the 
energy sector, the Government of Kazakhstan recently signed a 
 
ASTANA 00000871  003 OF 004 
 
 
memorandum giving preliminary approval to establish an energy 
research and training complex in Aktau, the Caspian Energy 
Hub.  The proposed hub would include a science and technology 
park, a geophysical laboratory, a renewable energy center, 
and facilities for personnel training, information technology 
development and environmental research.  Development of the 
hub is expected to take 3-5 years, with a first stage 
investment of $400 million dollars and an ultimate cost of 
$10 billion.  In order to further increase the number of 
skilled industrial workers, planning has started to establish 
a Caspian University of Technology and Engineering in Aktau. 
The aim, according to Oblast officials, is to create an elite 
university that will attract students from across the Caspian 
region. 
 
The Caspian Riviera? 
-------------------- 
 
13. (SBU) Oblast officials told Poloff of plans to establish 
a large tourist complex in Kenderli, south of Aktau. The 
area, according to the officials, has 1.7 thousand hectares 
of resort area.  The Kazakhstanis intend to build 23 hotels, 
with KMG building two five star hotels.  An international 
airport will be built, and the Kazakhstanis hope to attract 
330,000 tourists annually, primarily from Russia and other 
CIS countries.  (Note: Many huge villas already dot the 
Caspian coast, including one given to President Putin as a 
gift by President Nazarbayev.) 
 
14. (SBU)  Oblast officials acknowledged to Poloff that they 
will need to attract workers to Aktau and the region in order 
to have the necessary manpower to complete many of their 
proposed projects.  They hope that the opportunities offered 
will attract workers not only from Kazakhstan, but also from 
Azerbaijan, Turkmenistan, and Iran.  They believe that in 
coming years the population of Aktau (currently 200,000) and 
the Oblast (400,000) will double.  As part of the expansion, 
project financing has started for the "Aktau City" project, a 
new downtown for the city.  Initial construction began on 
February 25. 
 
Civil Society in the Oblast: Differing Views 
-------------------------------------------- 
 
15. (SBU) On April 23, Poloff met with Yedil Jamburchin, Nur 
Otan first deputy chairman for Mangystau Oblast, in Nur 
Otan's modern headquarters (Note: Nur Otan will soon move 
their headquarters to an even more fashionable glass and 
steel building in Aktau). Jamburchin was stylishly dressed, 
charismatic, and concisely recited Nur Otan's strategy for 
the region.  After last year's parliamentary elections, he 
said, Nur Otan created regional programs focused on projects 
such as bringing health care systems to villages.  "We are 
not just in oblast centers," he said.  He identified rising 
inflation and the high price of food as the biggest problems 
facing Kazakhstan.  Asked about the state of civil society in 
the Oblast, Jamburchin responded that there "are no 
problems." and
that an independent print and TV media exists. 
 (Note: Nur Otan received 97% of the vote in Mangystau Oblast 
in the most recent election, its highest percentage in any 
oblast.) 
 
16. (SBU) On the same day, Poloff held a roundtable 
discussion with representatives from the Ak Zhol, Alga, Azat, 
and National Social Democratic Parties.  All bemoaned 
political conditions in the Oblast.  Ak Zhol representative 
Agzam Zhumsakov said that nothing has changed in Kazakhstan 
since it was granted the OSCE chairmanship for 2010.  Alga 
Party representative Svetlana Chetvertnykh expressed her 
belief that opposition parties can appeal to those not 
benefiting from Kazakhstan's progress, such as pensioners, 
government workers, and the "socially vulnerable."  Beyond 
the shining facades of new buildings, little change is 
occurring, she said.  Each representative claimed that it 
remains difficult for opposition parties to operate.  In 
Aktau, it is impossible to criticize new projects because of 
Nur Otan's complete control of local government.  They also 
told Poloff that they face consistent government harassment 
and that after the roundtable talk "people will be waiting on 
the streets for us," according to NSDP representative Adil 
Uly.  The representatives were confrontational with Poloff 
and asked on numerous occasions why the United States is not 
doing more to promote democracy in Kazakhstan.  Chetvertnyk 
admitted, however,  that people still have faith in the 
government and all of the representatives were murky when 
discussing the plans of their parties to attract greater 
 
ASTANA 00000871  004 OF 004 
 
 
support. 
 
----------- 
Comment 
----------- 
 
17. (SBU)  Aktau is still a sleepy town in comparison with 
Almaty and Astana.  Its growth potential, however, is 
significant, particularly when oil from Tengiz and Kashagan 
is shipped westwards.  The Kazakhstanis see Aktau as a 
potential "capital city" of the Caspian region, the central 
point for transportation, regional educational cooperation, 
and even tourism.  If the cross-Caspian route is the new Silk 
Road for Central Asia, Aktau may yet prove to be its 
Samarkhand. 
ORDWAY

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