08ASTANA1870, KAZAKHSTAN – DECISION NOT TO INVEST IN BATUMI REFINERY

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Reference ID Created Released Classification Origin
08ASTANA1870 2008-09-25 10:57 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO1422
OO RUEHAST RUEHBI RUEHCI RUEHLH RUEHLN RUEHPW RUEHVK RUEHYG
DE RUEHTA #1870 2691057
ZNR UUUUU ZZH
O 251057Z SEP 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3397
INFO RUCNCIS/CIS COLLECTIVE 0650
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE

UNCLAS ASTANA 001870 
 
SENSITIVE 
SIPDIS 
 
EEB FOR SPECIAL ENVOY BOYDEN GRAY AND AMBASSADOR STEVEN MANN 
 
E.O. 12958: N/A 
TAGS: EPET EINV PGOV KZ GG
SUBJECT:  KAZAKHSTAN - DECISION NOT TO INVEST IN BATUMI REFINERY 
MADE WELL BEFORE GEORGIA CONFLICT 
 
1. (SBU) Energy Officer spoke on September 25 to Nurlan Sauranbayev, 
Managing Director of Oil Transportation at KazMunaiGas (KMG), about 
press reports that KMG has abandoned plans to invest $1 billion in 
an oil refinery in the Georgian port city of Batumi.  Sauranbayev 
confirmed that KMG decided not to make the investment, but said the 
decision was made well before the August conflict in Georgia and was 
made entirely for economic reasons. 
 
2. (SBU) Sauranbayev strenuously denied the implication that 
Kazakhstan was pulling its investments out of Georgia.  On the 
contrary, he emphasized that the Batumi oil terminal is a strategic 
asset of KMG and is an "essential element" of Kazakhstan's 
multi-vector transportation policy, in particular maintenance of the 
Eurasian corridor.  In fact, Sauranbayev said that he had just met 
with representatives of Chevron and was planning to meet later in 
the day with representatives of ExxonMobil to discuss expansion of 
oil shipments from Atyrau to Baku and onward to Batumi. 
 
3. (SBU) According to Sauranbayev, development of the feasibility 
study for a new Batumi refinery was suspended long before the crisis 
erupted in the Caucasus.  In 2007, KMG sent a team of engineers to 
Batumi to assess the feasibility of either renovating the existing 
refinery or building a new (green field) refinery.  Ultimately, KMG 
determined that neither project was commercially viable because the 
existing refinery did not meet minimum technical specifications and 
a new refinery would require a larger plot of land at a greater 
distance from residential housing and the sea than would be possible 
at the site. 
 
4. (U) In August 1999, UK-based holding company Greenoak Group paid 
$27.1 million for an oil transshipment facility on an 80-hectare lot 
near the port of Batumi in a privatization transaction with the 
Georgian government. Greenoak Group subsequently invested more than 
$60 million over three years to upgrade terminal facilities. In 
December 2006, Greenoak Group subsidiary Naftrans and KMG subsidiary 
KazTransOil formed a joint venture called Batumi Terminals JV in 
order to secure future volumes for the Batumi terminal and the 
Azerbaijan-Georgia rail corridor. In March 2007, Greenoak Group and 
KMG signed a memorandum of cooperation to develop a feasibility 
study for a new refinery in Batumi. 
 
5. (SBU) Mogens Hansen, CEO of the Batumi Oil Terminal, and a member 
of Greenoak Group's senior management, told Energy Officer on 
September 25 that there was "nothing strange at all about the 
decision" not to build a new refinery.  When asked if KMG's decision 
had anything to do with the conflict in Georgia in August, he said, 
"no, no, no -- nothing to do with that -- this was strictly a 
business decision." 
 
6. (U) According to Greenoak, the Batumi terminal's transshipment 
capacity is currently 12 million tons per annum and the reservoir 
capacity is over 510,000 tonnes. Unloading capacity is 212 railway 
tank cars.  Vessel loading is performed at three berths and one 
offshore loading buoy.  The Batumi Oil Terminal is capable of 
handling vessels with deadweight up to 130,000 tons with drafts 
ranging from 12 to 16 meters and length up to 255 meters. 
 
MILAS

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