08ASTANA1360, KAZAKHSTAN – EURASIAN ENERGY COORDINATOR MANN

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Reference ID Created Released Classification Origin
08ASTANA1360 2008-07-28 08:51 2011-08-30 01:44 CONFIDENTIAL Embassy Astana

VZCZCXRO7470
PP RUEHBI RUEHCI RUEHFL RUEHKW RUEHLA RUEHLH RUEHPW RUEHROV RUEHSR
DE RUEHTA #1360/01 2100851
ZNY CCCCC ZZH
P 280851Z JUL 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC PRIORITY 2850
INFO RUCNCIS/CIS COLLECTIVE 0582
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/SCA COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 ASTANA 001360 
 
SIPDIS 
 
E.O. 12958: DECL: 07/28/2018 
TAGS: EPET PREL PGOV EINV KZ AJ TX GG
SUBJECT: KAZAKHSTAN - EURASIAN ENERGY COORDINATOR MANN 
DISCUSSES ENERGY TRANSPORT WITH SAMRUK DEPUTY HEAD KABYLDIN 
 
Classified By: Pol-Econ Chief Steven Fagin, Reasons 1.4 (b) and (d) 
 
------- 
SUMMARY 
------- 
 
1. (C) Samruk Deputy Chairman Kairgeldy Kabyldin told 
visiting Eurasian Energy Diplomacy Coordinator Steven Mann on 
July 24 that the international oil and gas companies have 
insisted on ownership stakes in the pipeline portion of the 
Kazakhstan-Caspian Transportation System (KCTS) -- i.e., the 
pipeline which will bring crude from the oil fields to 
Kazakhstan's Caspian coast.  President Nazarbayev offered 
Chevron a lead role in the pipeline, but no final agreement 
has yet been reached.  Kabyldin indicated he believed that 
the Azeris were slow-rolling bringing the Baku-Supsa pipeline 
back on line.  They have been pressing Kazakhstan to use more 
expensive transport options, including rail, he claimed.  End 
Summary. 
 
------------------------ 
FORWARD MOVEMENT ON KCTS 
------------------------ 
 
2. (C) Eurasian Energy Diplomacy Coordinator Ambassador 
Steven Mann met on July 24 in Astana with Kairgeldy Kabyldin, 
Deputy Chairman of Kazakhstan's Samruk state holding company 
and former Managing Director of the transport division of 
Kazakhstan's state oil and gas company, KazMunaiGas (KMG). 
(Note:  Samruk is the 100 percent owner of KMG.  End Note.) 
Kabyldin was accompanied by KMG Vice President Daniyar 
Berlibayev. 
 
3. (C) Kabyldin explained to Mann that Samruk and KMG's 
priorities in energy transport include expansion of the 
Caspian Pipeline Consortium (CPC) pipeline, implementation of 
the Kazakhstan-Caspian Transportation System (KCTS), and the 
construction of oil and gas pipelines to China -- for which, 
he noted, the Chinese have provided financial guarantees to 
the Kazakhstanis.   He reminded Mann that Kazakhstan and 
Azerbaijan had signed an Inter-Governmental Agreement (IGA) 
on KCTS in August 2007.  Negotiations between the two sides 
on the details of the trans-Caspian segment -- the terminals 
and the tankers -- are on-going.  Kabyldin met in June with 
SOCAR president Rovnag Abdullayev, with SOCAR and KMG 
agreeing to set up a joint venture company, each owning 50 
percent, to develop the trans-Caspian segment.  The Azeris, 
he said, do not want to give any ownership stakes to the 
international oil and gas companies. 
 
4. (C) The Kazakhstanis, Kabyldin continued, are in 
discussions with the international companies regarding the 
pipeline portion of KCTS, which would bring crude from the 
Tengiz field and later from Kashagan to the Caspian.  The 
Kazakhstanis are ready to guarantee access and specific 
tariffs to the companies with an agreement that would spell 
out all of the necessary details, but the companies have 
insisted on their own ownership shares in the pipeline, 
explaining that ownership best ensures their rights over the 
long-run.  Kabyldin admitted that if the companies hold 
ownership stakes, the funding for the pipeline should come 
more quickly and easily.  Mann said that as far as he knew, 
the Kazakhstanis had offered Chevron a lead role on the 
project.  Kabyldin responded that President Nazarbayev did, 
in fact, offer this option to Chevron CEO David O'Reilly in 
June, at the ceremony for the second generation expansion of 
TengizChevrOil (TCO), but that no final agreement has yet 
been reached.  He stressed that Kazakhstan and Chevron's 
interests are largely aligned -- with both wanting to move 
forward quickly in implementing KCTS and in securing transit 
access from Baku onward. 
 
---------------------------------- 
AZERIS SLOW-ROLLING ON BAKU-SUPSA? 
---------------------------------- 
 
5. (C) Kabyldin explained that Azerbaijan's priority for 
transport from Baku onward is BTC first and foremost, 
followed by railway to the Black Sea and the Baku-Novorossisk 
and Baku-Black Sea pipelines, including Baku-Supsa. 
Kazakhstan, however, is particularly interested in the 
Baku-Supsa pipeline, which remains out of utilization.  In 
fact, Kazakhstan would in the future like to get an ownership 
share in Baku-Supsa -- a move the Georgians are ready to 
support.  Kabyldin indicated he believed the Azeris are 
slow-rolling bringing Baku-Supsa back on line, arguing that 
in the two years it has supposedly been under repair, a whole 
new pipeline could have been built.  "One person whose name 
you know," he contended, is behind the delays, and that 
person's interests are so strong that Kazakhstan has been 
 
ASTANA 00001360  002 OF 002 
 
 
pressed to ship 25 million tons of crude by rail rather than 
using a pipeline.  In fact, it costs $30 per ton to ship 
crude from Baku to Batumi by rail, in comparison with just 
$0.40 per barrel to use the Baku-Supsa pipeline, Kabyldin 
noted.  (Comment: Mann believes that Kabyldin was referring &#x000A
;to Baku insider Abdulbari Gozel.  End Comment.) 
 
6. (C) Kabyldin explained that the Kazakhstanis are ready to 
pay a higher price to use Baku-Supsa, though the issue of 
whether the additional money would be paid to the Azerbaijani 
government or Baku-Supsa operator AIOC is a sensitive one. 
The Azeris, he stressed, can not themselves fill both BTC and 
Baku-Supsa.  If they fill BTC, Baku-Supsa will largely be 
empty.  A number of companies operating in Kazakhstan -- 
including Chevron and ConocoPhillips -- will have extra 
volumes of Kazakhstani crude that could be shipped through 
Baku-Supsa. 
 
7. (C) Mann asked Kabyldin which figures below President 
Aliyev are currently most influential in Azerbaijan's energy 
sector.  Kabyldin responded that in his view, this group 
would include SOCAR President Abdullayev, Deputy Mezhlis 
Speaker (and former head of SOCAR's foreign investment 
division) Valekh Aleskerov, and Energy Minister Natik Aliyev. 
 
------------------------------------ 
KAZAKHSTAN INTERESTED IN TURKMEN GAS 
------------------------------------ 
 
8. (C) KMG Vice President Berlibayev told Mann that 
Kazakhstan and Turkmenistan have always had good cooperation 
on gas.  Kazakhstan is interested in an off-shore Turkmen gas 
block that is adjacent to the area in the Caspian where 
Kazakhstan's "N Block" is located.  Mann expressed surprise 
that Uzbekistan had agreed to a pipeline transiting its 
territory to send Turkmen gas to China.  Berlibayev responded 
that the Uzbeks had told him they agreed to the pipeline 
because they never believed it would be built.  He added that 
Turkmengas head Tachberdy Tagiyev had told the Kazakhstanis 
that the gas Turkmenistan promised to China is 
newly-discovered gas, from the right bank of the Amu-Darya 
river.  Kabyldin told Mann that Kazakhstan has an interest in 
trans-Caspian gas pipelines as alternative gas routes, but 
this is a very sensitive issue, as it is important not to 
irritate Russia or China.  (Comment:  Kabyldin was apparently 
stressing Kazakhstan's support for alternative routes as a 
matter of policy.  For the foreseeable future, Kazakhstan 
will not have meaningful volumes of gas available to supply 
to a trans-Caspian gas pipeline.  End Comment.) 
ORDWAY

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