08ASTANA1699, KAZAKHSTAN – MASIMOV AND MYNBAYEV STRESS IMPORTANCE OF

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Reference ID Created Released Classification Origin
08ASTANA1699 2008-09-08 08:21 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO7451
OO RUEHAST RUEHBI RUEHCI RUEHLH RUEHLN RUEHPW RUEHVK RUEHYG
DE RUEHTA #1699 2520821
ZNR UUUUU ZZH
O 080821Z SEP 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3218
INFO RUCNCIS/CIS COLLECTIVE 0625
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE

UNCLAS ASTANA 001699 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET EINV PGOV KZ
SUBJECT:  KAZAKHSTAN - MASIMOV AND MYNBAYEV STRESS IMPORTANCE OF 
DIVERSE ENERGY ROUTES AT KAZENERGY FORUM 
 
1. (U) The 3rd annual KazEnergy Eurasian Energy Forum was held in 
Astana during September 4-5.  In opening remarks, Prime Minister 
Masimov promised that Kazakhstan "will always be a reliable and 
dependable international partner," stressing that Kazakhstan's 
"principled stand" is "to ensure stability of supplies and contracts 
[and] provide a predictable and consistent basis for international 
partners operating in our country."  He stressed that Kazakhstan 
remains committed to diversification of export routes for energy, 
while adding that the selection of any specific project will be 
based on an assessment of its economic viability.   Masimov said 
that Kazakhstan would participate in all major Eurasian transport 
projects, including the Caspian Pipeline Consortium (CPC) pipeline, 
Baku-Tbilisi-Ceyhan (BTC), the Atasu-Alashkankou (Kazakhstan-China) 
oil pipeline, Burgas-Alexandroupolis, and the Prikaspiskiy gas 
pipeline.  Masimov explained that Kazakhstan's new tax code will 
streamline methods for calculating rent taxes and excess profit 
taxes and said that royalty payments will be replaced by a tax on 
extraction.  He added that Kazakhstan will "speed up the 
modernization of its domestic oil processing and energy generating 
infrastructure." 
 
2.  (SBU) Minister of Energy and Mineral Resources Sauat Mynbayev 
followed Masimov's speech with a detailed overview of the energy 
sector.  On transportation, he noted that expansion of the 
Atyrau-Samara oil pipeline to Russia is underway; construction of 
the Beyneu-Akbulak gas pipeline to China has started; and Transneft, 
KazMunaiGaz, and other CPC partners have reached agreement in 
principle to expand the CPC pipeline by 2012, with only a few 
"procedural questions" remaining to be resolved.  (Note: In a 
September 8 meeting with the Ambassador, Mynbaev was more frank.  He 
complained that BP -- which owns 12.5% of the CPC through a joint 
venture with Lukoil called LUKARCO -- is holding up CPC expansion. 
"Little BP could ruin everything," he maintained. Mynbaev argued 
that as the largest stakeholder in Tengizchevroil, Chevron should 
buy LUKARCO's stake in CPC.  He then suggested that "if the price is 
right," KazMunaiGaz would buy LUKARCO's share to break the impasse. 
End Note). 
 
3. (U) In his speech, Mynbayev particularly stressed the importance 
of the gas pipeline to China, noting that Kazakhstan currently 
exports gas to Russia only.  He argued that Kazakhstan must expand 
its oil refining capacity through the modernization of its three 
existing refineries in Shymkent, Aktau, and Pavlodar, as well as the 
construction of new refineries.  Mynbaev also briefly discussed the 
state of Kazakhstan's electricity sector.  He acknowledged that the 
price of electricity in Kazakhstan is very low (3 to 4 cents per 
kilowatt hour) compared to global averages and tariff setting is not 
transparent, which Mynbaev said has discouraged much-needed private 
investment.  "We have subsidized the price of electricity for too 
long," he said.  "The most important thing," according to Mynbaev, 
"is long-term tariff stability."  On nuclear power, Mynbaev stated 
that Kazakhstan aspires to become the world's second biggest uranium 
producer and has set a goal of producing 400,000 tons per year. He 
also noted that KazAtomProm plans to construct a nuclear power plant 
in Aktau by 2012. 
 
4.  (SBU) Presidential Energy Advisor Nurlan Balgimbayev proudly 
cited Kazakhstan's success in attracting foreign direct investment 
in its oil and gas sector, noting that exports continue to climb in 
both volume and value.  Balgimbayev said that the government 
welcomed new private investment, including in oil refineries, oil 
and gas transportation infrastructure, and the petrochemical 
industry.  He pointedly maintained, however, that "the time has come 
to balance the interests of the oil companies with those of the 
Government of Kazakhstan," especially with regard to the new tax 
law.  The government must increase both production and revenue, he 
stressed.  (Note: These comments were singled out by Steve Rose, 
ExxonMobil General Manager for Kazakhstan, as among the most 
significant statements of the day.  End Note.) 
 
ORDWAY

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