09ASTANA430, KAZAKHSTAN: THE HIGH-FLYING MARABAYEV BROTHERS ARE A

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Reference ID Created Released Classification Origin
09ASTANA430 2009-03-11 06:45 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO6127
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
RUEHKW RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW
RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0430/01 0700645
ZNR UUUUU ZZH
O 110645Z MAR 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4861
INFO RUCNCIS/CIS COLLECTIVE 1328
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0707
RUEHKO/AMEMBASSY TOKYO 1410
RUEHUL/AMEMBASSY SEOUL 0394
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0889
RUEKJCS/SECDEF WASHDC 0802
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1300

UNCLAS SECTION 01 OF 03 ASTANA 000430 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV PINR ECON EPET EINV KZ
SUBJECT:  KAZAKHSTAN:  THE HIGH-FLYING MARABAYEV BROTHERS ARE A 
FORCE IN THE ENERGY INDUSTRY 
 
ASTANA 00000430  001.2 OF 003 
 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  Yermek Marabayev and his brother Zhakyp 
Marabayev are two of Kazakhstan's most influential oilmen.  Yermek 
is General Director of KazMunaiTeniz (KMT), which manages the 
government's offshore oil exploration and production assets; his 
younger brother Zhakyp was recently appointed Deputy General 
Director of the North Caspian Operating Company developing the 
supergiant Kashagan oil field.  Sons of the late Nasibkali 
Marabayev, a highly regarded veteran of the industry, the brothers 
are smart, savvy, and well-positioned to have an impact on the 
future development of Kazakhstan's largest, most important oil 
fields for years to come.  On March 3, Energy Officer spoke with 
Yermek Marabayev about offshore prospects in the Caspian, the 
investment climate in Kazakhstan, and choosing international 
partners to develop new discoveries.  END SUMMARY. 
 
CASPIAN OIL EXPLORATION ONLY JUST BEGINNING 
 
3. (SBU) Marabayev was extremely optimistic about the future 
prospects for KazMunaiTeniz (KMT) -- which is a subsidiary of state 
oil and gas company KazMunaiGas (KMG) -- despite current economic 
conditions.  He said that although KMT does not currently manage any 
producing fields, he expects great things from the Zhemchuzhina 
("Pearls") and Kashagan projects in the near future.  (NOTE:  Shell 
is the lead operator of the Pearls project and reported successful 
tests in 2008 from two exploratory wells at the project site. 
Appraisal drilling is expected to begin in April.  Shell also leads 
the offshore development of Kashagan and partners with KMT, the 
government's authorized representative, on both projects.  END 
NOTE.)  Although he is focused on developing Pearls and Kashagan, 
Marabayev insisted that there are other large offshore oil fields in 
the Caspian, waiting to be discovered.  In particular, he pointed to 
a map on his wall and traced an unexplored area just south of the 
Kalamkas reservoir and north of the port of Bautino, circling a 
block owned by KMT called the Kurmangazy Contract Area.  "There's 
more out there," he said, "This is just the beginning" for KMT. 
When asked what constraints his business faced at the moment, he 
replied, "Only rigs.  We need more drilling rigs." 
 
IMPACT OF ECONOMIC CRISIS DOWNPLAYED 
 
4.  (SBU) Marabayev denied that the economic crisis has had an 
adverse effect on KMT's operations and said his company will 
continue to invest in seismic testing and other exploration 
activities at Pearls.  He also said that KMT would continue to meet 
Kashagan's cash calls three times a month.  Marabayev also denied 
rumors that production at Kashagan would be delayed because of the 
crisis and said the consortium still expects early oil in the fourth 
quarter of 2012 and initial production in 2013.  "We can't miss that 
deadline," he said, smiling, "or else the government will not 
reimburse us for capital expenditures.  And that is a price nobody 
can afford to pay." 
 
INVESTMENT CLIMATE COMMENTS 
 
5.  (SBU) When asked about increasingly strict local content 
requirements, Marabayev said he understood the government's goals of 
developing skilled labor and supporting domestic employment. 
However, he suggested that the "intelligent way" to build local 
capacity would be to transfer skills, technology and know-how 
gradually, over a period of 20 to 25 years, and he cited Shell's 
work in Oman as an example of how that could be done in a mutually 
beneficial manner. 
 
6.  (SBU) Marabayev was also unfazed by proposed changes to the 
Subsoil Law that could lead to separate contracts for the 
exploration and production of new fields.  "International oil 
companies should not worry," he said, "because the company that wins 
the exploration contract will be given preferential treatment to 
produce the field."  (COMMENT:  That is easy for him to say.  As 
 
ASTANA 00000430  002.2 OF 003 
 
 
General Director of the government's "authorized agent," he would be 
guaranteed a role in the future development of a field in any case. 
END COMMENT). 
 
CHOOSING A PARTNER 
 
7.  (SBU) When asked how the government
chooses international 
partners for exploration and development projects, Marabayev 
initially tried to deflect the question.  He modestly said that he 
merely manages the state's stake in offshore projects and is not 
consulted on all strategic decisions.  When pressed, however, he 
said that KMT's parent company KazMunaiGas (KMG) bases its decision 
on a calculation of risk and return and an assessment of the "total 
package" offered by prospective partners.  He cited, for example, 
the recent announcement that Norway's StatoilHydro would be given 
the right to negotiate with KMG to develop the Abai offshore block. 
Marabayev suggested that StatoilHydro would be a good strategic 
partner to develop that field because of the company's prior 
experience developing structures with a similar gas-oil mix, its 
innovative trunkline gas pipeline system, and its ecologically clean 
production methods. 
 
8. (SBU) On February 26, KMG President Kairgeldy Kabyldin met with 
StatoilHydro CEO Helge Lund to discuss terms of the deal, which 
reportedly offers KMG the opportunity to participate in other 
international projects managed by StatoilHydro.  StatoilHydro has 
been attempting to win exploration and production rights for the 
block since it signed a memorandum with the government in 2005.  The 
Abai block is located in the offshore area of Kazakhstan's sector of 
the Caspian shelf, 60-70 kilometers northwest of the Bozashi 
peninsula.  The sea depth in the exploration area is 8-10 meters. 
 
U.S. COMPANIES COMMENT ON THE MARABAYEV BROTHERS 
 
9.  (SBU) Patty Graham, ExxonMobil Kazakhstan's Government Relations 
Director, told Energy Officer on March 5 that Yermek Marabayev is "a 
good partner and a good guy who comes from an oil dynasty."  (NOTE: 
ExxonMobil owns 16.66 percent of the Kashagan project, for which 
Zhakyp Marabayev is Deputy General Director.  KMT manages the 
government's stake of 16.81 percent.  END NOTE).  Graham said that 
Yermek Marabayev has focused on building KMT's capacity to prepare 
for its eventual transition to a lead operatorship.  She praised his 
business acumen and "IOC outlook" and called him a "strong ally," 
who understands and supports the business process. 
 
10.  (SBU) Nick Olds, Caspian Region President for ConocoPhillips, 
said Yermek Marabayev is "someone we're comfortable doing business 
with," adding, "It's likely that he'll be asked to oversee the 
state's interest in the N Block, once we move to exploration." 
(NOTE:  ConocoPhillips owns 8.28 percent of the Kashagan project and 
is negotiating with the government to develop the N Block.  END 
NOTE.)  Olds also said that Yermek Marabayev has been very helpful 
in ongoing negotiations with the government over the removal of a 
sunken Soviet-era rig in the N Block exploration area.  When asked 
about Yermek's younger brother Zhakyp, Olds said, "He is also very 
capable, very smart, and very connected.  But he has had a checkered 
past, including charges of corruption."  (COMMENT:  ExxonMobil's 
Graham also hinted that Zhakyp Marabayev had skeletons in his 
closet, but we were unable to substantiate the charges.  END 
COMMENT.) 
 
BIONOTES 
 
11.  (SBU) Yermek Marabayev, 49, was born on December 26, 1959, in 
Moscow, where he followed in his father's footsteps and graduated 
from the Soviet Union's Oil and Gas Institute in 1982.  Like his 
father, he began his career as a driller at the Uzen oil field in 
Mangistau oblast, where he worked from 1982-84.  He held various 
engineering and drilling jobs in the oil industry in western 
Kazakhstan from 1984-1991.  From 1991-95, he worked for the 
Mangistau oblast government in the natural resources and 
 
ASTANA 00000430  003.2 OF 003 
 
 
international affairs departments, and in 1995, Marabayev moved to 
London, where he marketed and traded Kazakhstani crude for 
Kazakhstan Trading House until 1997.  From 1997-99, he was Deputy 
General Director for KuatAmlonMunay JV and from 1999-2001, he was 
Deputy Director for Exploration and Development of 
HurricaneKumkolMunay.  In 2001, Marabayev joined Chevron, where he 
worked until 2005 as a commercial manager for ChevronNefteGas.  From 
2005-2007, he worked for KurmangazyPetroleum, eventually becoming 
General Director.  In April 2007, he was named First Deputy General 
Director of KazMunayTeniz (KMT) and in September 2007, he was named 
General Director of KMT.  Marabayev received a Master's degree in 
Economics from Kingston University in London in 2004.  He is married 
with three daughters. 
 
12. (SBU) Zhakyp Marabayev, 46, was born on August 9, 1962 in 
Kazakhstan's oil capital of Atyrau (then known as Guriev).  He 
graduated from the Oil and Gas Institute in Moscow in 1984, where he 
majored in mining engineering.  From 1984-90, he worked for 
Komsomolskneft in various technical positions, eventually heading 
the technology department.  In 1990-91, he joined the government as 
Director of the Commercial Office of the Ministry of Internal 
Economic Affairs.  In 1991, he joined the Ministry of Energy, where 
he worked on offshore oil exploration technology until 1993.  From 
1993-98, he worked for KazakhstanCaspiShelf as Vice President and 
ultimately General Director.  From 1998-99, he was First Vice 
President of KazakhOil, with responsibility for project finance. 
From 1999-2001, he was a Vice President for KazTransOil; from 
2001-02, he was Deputy General Director of the Oil and Gas 
Transportation Company, a predecessor of KazMunaiGas (KMG).  From 
2004-06, he was General Director of KMG Exploration and Production, 
and in December 2006, he was appointed Chairman of the Board for Oil 
and Gas Industry Development of KazEnergy Association.  He is now 
Deputy Managing Director of the North Caspian Operating Company and 
non-executive chairman of Timan Oil and Gas LLP, listed on the 
London Stock Exchange.  In 2002, he received a Ph.D.-equivalent 
degree from the Moscow State University of Management. 
 
13. (SBU) Nasibkali Marabayev, the father of Yermek and Zhakyp, was 
a highly respected figure in Kazakhstan's oil and gas industry.  He 
graduated from the Oil and Gas Institute in Moscow, started his 
career as a driller, and worked in the industry until his death in 
August 2007, at the age of 70. 
 
HOAGLAND

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