Kazmunaigas – We Are Open to New Opportunities
A meeting between Kazmunaigas President Kairgeldi Kabyldin and representatives of a number of foreign media outlets has been held as part of the international energy conference. The following is the interview that Kazmunaigas president gave at the meeting.
Mr. Kabyldin, what are the preliminary results of the implementation of the development programme for the Kazakh sector of the Caspian Sea? How is it being implemented?
We are pinning our hopes on the resource potential of the Kazakh sector of the Caspian Sea. Geological and prospecting projects on the sea and coastal areas of the Caspian Sea are priority routes in the development of Kazmunaigas. There is a special company named Kazmunaiteniz, which is responsible for operations on the Caspian shelf and has experience of offshore operations.
The successful realisation of offshore projects could increase Kazmunaigas’ extraction of mineral resources by 150%. This would make it possible to increase the company's annual output to 25–30 million tonnes of oil in the future.
InadditiontotheNorth-Caspian project, which includes the Kashagan field, the national company is conducting comprehensive exploration and research works on a number of promising fields, including Kurmangazy, Zhemchuzhina, Tyub-Karagan, Zhambay, Zhambyl etc.
Kazmunaigas plans to complete the preparation for the agreement with a group of domestic investors over the Mertviy Kultuk project until the end of this year so that the company can begin to implement the essential programme of exploration in 2009.
The company is also finishing the construction of the Auyezov-1 prospect well as part of the Zhemchuzhina project on the Caspian shelf.
The plan is to drill the second prospect well as part of the Kurmangazi project, the Khazar-2 development test well as part of the Zhemchuzhina project and the first prospect well as part of the Zhambay project in 2009.
To what extent is Kazmunaigas interested in its increasing assets abroad through participating in European joint stocks? What are the plans concerning entering mainland European markets, especially through Romania?
Undoubtedly, our company is significantly interested in broadening its activities and entering foreign markets. Last year, we purchased 75% of Romania's Rompetrol Group. The European Union approved this transaction.
TRG’s main business is focused on Romania. It comprises over 40 companies working in various sectors, including oil refining, petrochemistry, steel casting, oil and oil products storage and transportation, and a well-developed retail and wholesale chain in European countries.
TRG has about 180 petrol stations in France. It also has a chain of petrol stations in Bulgaria, Moldova, Georgia and Ukraine. An oil products retail and wholesale business is successfully operating in Spain. A wholesale company is actively operating in Switzerland. In its own port in Konstanta, the company is modernising a condensed gas unloading and receiving terminal. The company has begun to build three terminals for receiving oil and shipping oil products, particularly oil product shipping terminal across the Danube River. Thanks to the channel connecting the Dunabe River and the Black Sea, in the future it will be possible to ship products to Romania's south, to the north of Bulgaria, Serbia, Austria and Hungary. The terminal will be designed for all the types of vessels that can sail on the Dunabe River.
Considering the fact that Kazakhstan expects to increase the annual oil extraction to 100–150 million tonnes in the near future, significant oil volumes will be exported. And, of course, it is more profitable to sell finished oil products, which are used in virtually all economic sectors, rather than crude oil. Our Romanian assets are well-placed in Europe. It is for this reason that we are considering the development of Rompetrol, processing sectors and distribution networks. We may have to build new oil refineries in the future.
What is the current situation surrounding the construction of the oil refinery in Ceyhan?
This is a current issue for us. Ceyhan is a very promising oil hub: oil from Iran, Azerbaijan and Kazakhstan will be transported to Ceyhan. Ceyhan has optimum opportunities. It is an open port where ships of various types can fuel up.
Turkey has made an offer to us; we will consider it jointly with Azerbaijan partners because they are also interested in this project. We do not rule out the possibility that Russian oil may appear in Ceyhan too – the plan is to build a super petrochemical plant with a full production cycle. It is expected that this project will be implemented in 2012-2013. Today we are holding talks over this project and waiting for the oil refinery construction’s feasibility study. After we receive it, we will make decisions as to the project implementation. Iran is also offering to build a plant in the north of the Caspian Sea. At the moment, oil is supplied to the plants in Iran’s north from the Persian Gulf.
We have been offered the opportunity to become a shareholder in this project, which will create profitable conditions for exporting oil to other countries. However, there are certain limits linked with Iran. We, and our Iranian counterparts, have agreed that Iran will prepare the necessary project research information. We are open to new opportunities.
A number of western analysts believe that investment risks have significantly grown in the Caucasus because of the tense political situation in the region. What is your opinion concerning future transportation through this route? How realistic are the forecasts by western analysts? What are your plans for raw material transportation on this route, that is via Baku and Batumi?
I know this project very well because I was involved in it before. I will not make any political evaluation because that is a politicians’ job. There is no political pressure by our neighbours; these routes were planned ten years ago and Russia has never spoken out against this project. I personally believe that trade and economic relations are the right tools to settle this political conflict. One should take into account that Georgian transportation routes will be laid across several other countries. Also, each member country guarantees the security of the route in its territory in line with international practice. We will not change our plans. Business is business. And everyone understands that.
Could you share your opinion about the future of gas projects in Central Asia with us? Can you comment on recent agreements between Russia and Uzbekistan? There had been discussions about the reconstruction of existing pipelines, but the plans changed abruptly.
I cannot comment on the Russian-Uzbek agreement because I am not familiar with it. However, it is more likely that the matter in question is the development of the oil and gas transportation system in Uzbekistan.
As you know, four countries, including Kazakhstan, Russia, Uzbekistan and Turkmenistan, signed an agreement to cooperate on transportation system development. These agreements are aimed at developing the transit system, particularly the Central Asia-Centre (CAC) pipeline. Kazakhstan has already started to modernise its section. We estimated the transit system’s capacity at 60 billion cu m per year – the plan is to increase this capacity to 80 billion cu m in the future, as part of the Caspian gas pipeline construction. Parts of this project will belong to each member country’s national operator.
All the members will agree specifications, as well as the project design. It would be logical to assign a single designer.
Chinese questions. What about the eastern route of the oil and gas pipeline?
As to the construction of the Chinese oil pipeline, we have virtually finished constructing the middle section. We are now implementing the second stage - the construction of the Kenkiyak-Kumkol section. The initial design capacity is 10 million tonnes, and the total capacity is 20 million tonnes. Any construction is carried out under the guarantee of a shipper or a shareholder and one of the project shareholders is actually China’s CNPC. This is why most of the workload will be put on the shoulders of our Chinese partners. As far as our position is concerned, the oil pipeline on this route is being constructed for strategic reasons.
China is a huge oil importer; its oil import today stands at 250 million tonnes per year. We are talking about 20 million tonnes, which will only meet the need of west China. I would like to note that we are not competing with Russia on this market because our interests do not conflict in geographic terms. Russia is working in other regions of China. As to our export oil price, I should like to say that the oil price is competitive because no one wants to incur losses. I think that our Russian counterparts, who are transporting oil in China, are supplying oil at market prices. Oil will be transported from Atyrau only if the price will be economically acceptable. Our Chinese partners understand this very well. Oil flows to those who pay well.
What are your comments about the current situation surrounding the sale of Oman’s share in the CTC project? Who will get the share?
In accordance with the initial agreement, the state-run organisations are implementing the CTC project on a par with private companies. Therefore, only two state-run shareholders – the Russian and Kazakh governments – have the right to buy Oman’s share. Otherwise, the initial balance between the governments and private companies will be disturbed. Both us, and our Russian counterparts, are interested in purchasing Oman’s share. I think that a compromise will be found between the interests of Russia and Kazakhstan.
Are the European Union and Kazakhstan holding talks over the oil and gas pipeline construction bypassing Russia? Which transport routes are more urgent for Kazmunaigas today?
Kazakhstan is conducting multi-vector policy in transporting hydrocarbons. Undoubtedly, it is logical for Europe to have alternative routes. We also want to cut our risks in transit countries. Nevertheless, in this specific case, it is economically unreasonable to build a new oil pipeline because there are transit capacities that are not being used. Secondly, there is the option of expanding the existing pipelines in order to increase the economic efficiency. It takes more than one day to develop and implement these kinds of projects. Therefore, it is inexpedient to rely on the existing situation while making important decisions. We are interested in using the Baku-Supsa oil pipeline, which has been operating for long time.
As to the best alternatives, we are developing both eastern and western routes. We are ready to work with all the regions and companies who are interested in mutually profitable cooperation.
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