And All of This Is About It...
Editorial
On the eve of the People’s IPO performance the Government of Kazakhstan assigned KazTransOil with the status of a national operator at the main oil pipelines. Moreover, the government approved new higher tariffs for the oil transportation services. Taking into account the company’s plans to bring the internal tariffs up to the export level it makes the company quite attractive for investors.
On the 3rd November 2012 the resolution of Kazakhstan government came into force with regard to specification of KazTransOil JSC as a national operator of main oil pipelines. In accordance with the document, the company’s activity will be focused on developing of Kazakhstan system of main oil pipelines and ensuring their efficient, reliable and safe operation.
The main targets of the operator include:
·To protect interests of Kazakhstan and other participants of the relations while transporting hydrocarbons through main oil pipelines to the domestic and outer market;
·To support innovative development of main oil pipelines system and its integration into the international energy system;
·To take part into development and implementation of state and national programs aimed to elaborate oil and gas sector with regard to the oil transportation through main oil pipelines.
According to the resolution, “the national operator is entitled to perform operating services on the territory of Kazakhstan related to main oil pipelines if fifty and more percentage of voting shares (shares of participation) are directly or indirectly owned by the state, nationally controlled holding or a national company.” In addition, now KazTransOil is entitled to provide services on organization of oil transporting along the pipeline systems of other countries if the oil is supplied from the territory of Kazakhstan through the main oil pipelines which are beneficially or some other legally owned by a national operator (so called “operator’s activity on the unified route”).
As Mr. Kairgeldy Kabyldin, a General Director of KazTransOil JSC, said in his comments to the government’s resolution, he noticed that in accordance with the law on main oil pipelined his company will participate in all major international projects implemented in Kazakhstan or performed with the participation of Kazakhstan on the territory of third countries.
Meantime, on the 31st October the Agency on Regulation of Natural Monopolies approved new tariffs for the oil transportation services with the use of main pipelines and the tariffs became efficient since the 1st December 2012. Thus, a new export tariff for pumping of 1 ton of oil per 1 000 km was approved as KZT 4,732.6 (VAT excluded), and for the domestic market the cost is KZT 1,954.5 (VAT excluded). Previously, the tariffs were KZT 3,331 and 1,303 (VAT excluded) correspondingly.
And more than this, in his speech at the presentation confined to the placement of KazTransOil JSC shares in the program of the People’s IPO, Mr. Kairgeldy Kabyldin said that the company had an intention to raise the internal tariffs for oil transportation up to the level of export tariffs. As he said, such policy would be brought into force also within the frames of joint ventures with participation of KazTransOil JSC – Kazakhstan–Chinese Pipeline LLP and MunaiTas North-West Pipeline Company JSC. At the same time, Mr. Kabyldin did not specify when particularly such an adjustment will be performed.
It should be noted, that the new status and increasing of tariffs will have a positive influence onto the financial position of the company and it will make it more attractive for investors. In particular, by results of 2012 KazTransOil JSC expects about KZT 145 billion as a consolidated profit and in 2013 the expectations on a profitability level of the company are KZT 170 billion.
It should be reminded that KazTransOil JSC is a subsidiary of KazMunayGas NC JSC; also, it is considered to be the biggest oil transporting company in Kazakhstan. With its diversified network of main oil and water pipelines, 8 thousand km long in total, KazTransOil supplies approximately 59% of total oil produced in the country to the domestic and export markets.
ConocoPhillips Leaves Kashagan
On the 26th November, ConocoPhillips, an American company, made an official announcement that they planned to sell their 8.4% share in the North-Caspian Project to ONGC Videsh Limited, a subdivision of the Indian Publicly Traded Oil and Gas Corporation ONGS, which deals with international projects. It is expected that the bargain estimated at $5 billion will be completed within the first six months of 2013.
As Mr. Don Vallet, a Vice President of ConocoPhillips, said “this sake is an important part of our strategic program on disposal of assets. We are happy that ONGC Videsh acknowledges the value of the asset.” As it is marked in ConocoPhillips, the book value of assets owned by the Company with regard to Kashagan was $5.5 billion as of the 30th September 2012. Thus, Conoco is selling its share with a loss at $500 million compared to the book value and admits the asset to be written off after payment of taxes in amount of $400 million in the quarter 4 of 2012.
Speaking of ONGC, for 79% owned by the government of India, it has previously completed negotiations on the purchase of share in Kashagan with other American participant – ExxonMobil, however, the negotiations did not result in agreement. In addition, in April 2012 ONGC signed an agreement with the Government of Kazakhstan on the purchase of 25% share in the Satpayev exploration block at the Caspian Sea.
It should be mentioned, that the desirable share in the North-Caspian Project the Indian company will get if only Kazakhstan government and other partners of the consortium will not exercise their pre-emptive right.
Meanwhile, Mr. Sauat Mynbayev, Minister of Oil and Gas of Kazakhstan, said that ConocoPhillips never submitted an official notice to the authorities of Kazakhstan on their intention to sell the share at Kashagan. “No official proposal was made to the Interdepartmental Committee which considers this issue. Once the proposal is submitted the Committee will review it. Inoficially we know that: ConocoPhillips declared that they had been in negotiation with ONGC. But we do not know for sure if they come to final conclusion or not.”
The Minister of Oil and Gas also confirmed that Kazakhstan has a pre-emptive right for the share but the decision is still responsibility of the Committee which solely can consider the issue for two months since the relevant application is submitted. Besides, the bargain shall be checked against “the economic security or observation of national interests”. At the same time, Mr. Mynbayev emphasized that of ConocoPhillips sells their share the conditions specified in agreement on development of Kashagan field will not be revised.
Total’s New Asset
Total, a French oil and gas company, acquired 75% share in two concessions on development of the North and South blocks in the South-Western part of Kazakhstan where the previous operator was Nurmunai Petrogas. The total area of the two blocks is about 14.5 thousand km2.
As it was noticed by Mr. Yves-Louis Darricarrere, a Vice-President of Total on Exploration and Production, “the purchase of shares in two concessions previously owned by Nurmunai Petrogas complies with our strategy in the sector of exploration operations and this strengthens our presence in Kazakhstan.”
As a new operator of licenses Total wants to drill the first well in 2013.
Rating of KazMunayGas Raised
On the 21st November, Fitch Ratings raised the long term rating of emitter’s default for KazMunayGas National Company up to BBB level in foreign currency with a “steady” forecast. Simultaneously, the agency raised the priority non-secured rating of KazMunayGas Finance Sub. B.V. up to BBB level in foreign currency.
It happened the next day after Fitch increased the long-term rating of emitter’s default of Kazakhstan up to BBB+ for foreign currency from previous BBB, and up to A- for a national currency from previous BBB+ correspondingly. The forecast for long-term rating of emitter’s default of Kazakhstan is steady for the foreign and national currency.
In their explanations, the agency’s experts mentioned that KazMunayGas still get advantages due to strong relations with the government. But timely and full government support which would help to get totally equal ratings is not dominant as the considerable part of the company’s debt has no direct state guarantees. As a result, the rating of KMG is a level behind than the rating of the country.
Government Delays Penalties for Emissions
Imposing of penalties for emissions of greenhouse gases will be delayed in Kazakhstan. This was declared in the speech of Nurlan Kapparov, a Minister of Environment at the conference “On Implementation of Kyoto Protocol’s Actions in Kazakhstan” held on the 2nd November.
“2013 is the first year when the quota and trading system is implemented and we assert it as a pilot year”. This was reflected in a possible one-year delay of penalties to be imposed onto subsoil users and also in a simplified procedure developed for obtaining of quotas (no verification for reports of companies).”
Also, as the Minister said, during the pilot year, associations will participate in generation of changes and alternations to the regulatory framework accepted: “In the nearest time we’ll initiate the review of some regulations, for instance, such as regulations for distribution and issuing of quotas. Also, it is planned to change the Ecological Code”.
Mr. Nurlan Kapparov reminded that the National Quotas Distribution Plan was based on the free provision of quotas to companies on the level of 100% of 2010 emissions. “If a subsoil user has a deficit it can be covered by purchase of quotas from other players at the market. Provisions were made to supply no-cost quotas from the state’s reserve in case of output expansion and start-up of new units”.
According to the head of ecological department, at the moment the National Plan covers 178 companies of industry, power engineering, coal mining, as well as oil and gas mining with the total emission volume in amount of 147.2 million tons of CO2–equivalent.
“The National Plan restricts the companies’ emissions and oblige them to follow the programs on reduction of emissions. On default of obligations the companies shall pay a penalty in amount of 10 monthly calculation indices for each ton emitted above the allowable volume. This is a quite powerful drive to develop trading as the amount of penalty is much higher than the cost of quota.” According to Mr. Kapparov, today it is difficult to forecast the price for ton of COСО2– equivalent, “but certainly, the price will not be higher than European level (it is Euro 1.5-3 in EU)”.
At the same time, the Minister believes that it should not to delay implementation of the emission quoting system. “We think that it would be better to start the process and work it out now instead of facing with the actual and hard requirements of the international community and be not ready to it in the nearest future. I think that the latter scenario will probably have very complicated and unambiguous political and economic consequences”, – summarized the Minister of Environment.
Kazakhstan and China Build Another Gas Pipeline
The agreement was signed between the Government of the Republic of Kazakhstan and the Government of Chinese People’s Republic on construction and operation of gas pipeline on the route of Sarybulak–Zimunai as a result of IV Sub-Committee Meeting on Cooperation in the Sphere of Power Engineering of Kazakhstan and China Cooperation Committee held on the 8 November in Beijing.
The meeting of the Sub-Committee was chaired by Mr. Bolat Akchulakov, a Vice-Minister of Oil and Gas of Kazakhstan, and Zhang Yu Qing, a Deputy Head of Power Engineering State Administration of the Chinese People’s Republic, with the participation of interested ministries and companies of the two countries. At the meeting the parties discussed energy cooperation issues in the spheres of oil and gas industry, construction of petrochemical facilities, gas and oil pipelines as well as interaction in the area of nuclear power and renewable energy sources.
Additional Gas Supply Agreed by Kazakhstan and Uzbekistan
At the meeting held on the 22nd and 23rd of November in Tashkent the representatives of KazTransGas JSC and UzbekNefteGas NHC agreed on supply of 3 billion m3 of Uzbekistan natural gas to the southern regions of Kazakhstan through the main gas pipeline: Bukhara Gas-Bearing region – Tashkent – Bishkek – Almaty and Gazli – Shymkent. Besides, about 0.5 billion m3 will be transported additionally through the main gas pipeline Turkmenistan – Uzbekistan – Kazakhstan – China.
As it was informed in the press-centre of KazTransGas by this way the company took all possible measures to improve the situation with gas supply in Southern Kazakhstan and to avoid a failure in gas supply to population and to socially important facilities of the region during heating season.
We would like to remind, that according to the agreement between KazTransGas JSC and Gazprom JSC Kazakhstan should have been annually supplied with 3 billion m3 of gas from Uzbekistan within the frames of mutual exchange. However, Uzbekistan supplied only 2.5 billion m3 of this transparent fuel and it caused the deficit in gas supplies at the south of Kazakhstan. The situation was saved by arrangement of gas supplies from Uzbekistan through the main gas pipeline of Turkmenistan – China.
KazTransGas Upgrades Gas Networks in Taraz
In October 2012 KazTransGas JSC started the project on upgrading of gas distribution system in Taraz. It is expected to upgrade over 900 km of gas pipelines of the city within the frames of the project and to shift to the two-staged system of gas supply. It will help to solve issue with insufficient gas pressure at consumers, to increase the throughput capacity of the system as well as to apply meters with built-in smart-cards and thermal adjusting devices for more precise accounting of gas consumed.
As it was marked in the company, the implementation of the project will improve the reliability and stability of energy supply to population and facilities of the city. It will initiate conditions for development of industry, small and medium business and contribute to improved life quality.
Altogether, currently KazTransGas is completing the project on construction of supply pipeline from the automated gas distribution station of Kordai to Shu town in the Zhambyl Region. It was planned to complete the project in December, this year, if so, it will lead to gasification of 25 towns in the region.
KazTransGas Aimak came to market of Atyrau region
Since the 1st November KazTransGas Aimak JSC was officially recognized as a unified operator at the gas supply market of the Atyrau Region; the total length of gas pipelines operated by the company is about 4 thousand km and the annual consumption of natural gas is up to 1.3 billion m3.
In compliance with agreements between the company and the regional akimat the regional gas pipelines and facilities installed on them as well as buildings special vehicles, motor transport and other property is in the process of transfer from the municipal to the republican possession.
In its turn, KTGA shall guarantee the continuous supply of gas as well as saving of working places for employees involved in operation of the gas transportation system in the region. The company plans to increase the throughput capacity of the gas transportation networks in the region as well as to create a basis for gasification of new consumers and development of industrial facilities of the region.
It should be noted that KazTransGas Aimak JSC was established in April 2002 and nowadays it performs gas transportation along the distribution networks in eight of nine gasified regions of Kazakhstan covering 90% of the commercial gas sales in the Republic.
KazMunayTeniz moved to Aktau
The headquarter of KazMunayTeniz (KMT) MNC JSC is moving from Astana to Aktau. The decision was taken on the 19th October at the Board Meeting of KazMunayGas NC JSC which is a parent company of KMT.
It was done to improve the efficiency of management system over marine projects in Kazakhstani sector of the Caspian Sea and also it was stipulated by the necessity to optimize the activity and structure of management in KazMunayGas NC.
As it is assumed in KazMunayTeniz, the location of the company’s headquarter in the area of marine oil and gas operations will considerably accelerate the process of decision-making with a positive economic impact.
World Oil Market
It’s the first time for the recent decades when major oil companies and raw materials traders are ready to export considerable volumes of American oil. Such international giants as Royal Dutch Shell, BP and Vital have already appealed to the US government for export licenses.
Experts specify that the boom in oil production of the United Stated is capable to alter the distribution of powers in the global energy market. Increased export from the USA will change the trade relations between Europe, West Africa and North America. In their opinion, the discovery of considerable resources in the basin of the Atlantic Ocean may put pressure on Brent price, and Brent oil is produced in the Northern Sea and the price for the oil exceeds $100 per barrel. Many countries believe that this has a negative impact to their economies.
It should be noted that in previous times the federal laws in the USA as well as the dependency of the country from the imported energy products actually did not permit their export. But the increased production of hydrocarbons in such stated as Texas and Northern Dakota has already made the companies look for clients dealing with oil refining in adjacent Canada.
Ed Morse, a raw materials analyst of Citi believes that “further growth of oil production rates will presumably cause disputes if it is possible to extend the list of countries allowable for oil export which includes only Canada right now.”
We would like to remind, that currently the oil production in the USA hits the maximum level since 1995 when new technologies of extraction appeared and they helped to extract oil and gas from the fields which previously were considered as non-feasible. For the recent ten years, the USA exported less than 0.1 million barrels of oil per day while the import volume was 9 million barrels per day. At the same time the country exports a peak number of oil refining products including gasoline and other types of fuel.
Production statistics by results of January–October, 2012
As per the Statistics Agency, 65.5 million tons of oil and gas condensate were extracted in Kazakhstan for ten months of this year and this is 1.4% less compared to the same period of the previous year. In addition, the production of crude oil was 54.99 million tons (drop for 2.3%) and 10.54 million tons of condensate (growth for 3.6%).
Speaking of the natural gas, for the period of January–October, the scope of production increased for 1.5% and made 33.05 billion m3, including 16.82 billion m3 of natural gas in a gaseous state (+5.9%) and 16.23 billion m3 of oil gas (-2.7%).
The production of gasoline for the period was 2.33 million tons which is for 2.5% more than in January–October of 2011. At the same time, the production of diesel fuel has dropped for 2.8% up to 3.878 million tons and with regard to black oil fuel the drop is for 10.3% up to 3.176 million tons.
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