Tag Archives: Kazakhstan

Oil’s Fiscal Breakeven Points

OCT. 28 2016 (The Conway Bulletin) — Hiding behind timid smiles, officials from Central Asia and the South Caucasus oil and gas producing countries continue to say that the worst may be over for the region’s economic slump.

In the medium term, Kazakhstan will constantly boast about the restart of the giant Kashagan offshore project and Azerbaijan will try everything it can to attract investments for the Southern Gas Corridor, the pipeline network that will pump gas from the Caspian Sea to Europe.

Production, however, will continue to disappoint. Output will be flat in Kazakhstan, given a lift by Kashagan finally coming back on-stream after a three year delay, and decline in Azerbaijan.

Both countries have, on different occasions, praised the decision by OPEC, the oil producers’ lobby group, to freeze production to help push prices up again.

But behind the propaganda, lies a problem, which the IMF highlighted in its latest report: these countries will face higher fiscal breakeven oil prices in the next few years, piling pressure on their economies.

In April, the IMF said that the breakeven prices that Azerbaijan, Kazakhstan and Turkmenistan would need to balance their government budgets in 2016 were $47, $88 and $42.7/barrel respectively.

In a report this week, the IMF said breakeven prices for Azerbaijan and Turkmenistan had grown to $71 and $50.4/barrel respectively.

For 2016, oil prices are unlikely to average above $50/barrel, which means that the three major energy exporters in the region will have to use their reserves to prop up their economies. Officials may be happier now than in January budget issues are far from sorted.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

EITI tells Azerbaijan that civil society must be improved

ALMATY, OCT. 26 2016 (The Conway Bulletin) — The Extractive Industry Transparency Initiative (EITI), a global lobby group which effectively acts as an ethical watchdog for countries with economies that rely heavily on mining, oil and gas, said it will expel Azerbaijan from the organisation if it fails to reform its NGO laws within four months.

The Oslo-based EITI is influential because Western investment is often linked to compliance with its various rules. If Azerbaijan was kicked out of the group, it would threaten vital foreign investment deals.

Last year, the EITI downgraded Azerbaijan’s membership because of what it said was a crackdown on civil society.

At a meeting in Kazakhstan, the EITI said that Azerbaijan had improved some aspects of its economy and society, in line with recommendations drawn up last year during a so-called Validation process, but that more needed to be done to retain its membership.

“Azerbaijan has made important progress in opening up the oil sector and I am encouraged to hear about the recent plans for government reforms towards more transparency,” Fredrik Reinfeldt, chair of the EITI, said in a statement.

“I hope that the government will continue its recent efforts to ensure that civil society can play its proper role in this process, otherwise this progress risks being overshadowed.”

If Azerbaijan fails to keep its EITI membership, investment for its Southern Gas Corridor, a pipeline network that will pump gas from the Caspian Sea to Europe, will be at risk.

Specifically, in September the EBRD said it would reconsider a $1.5b loan for the TANAP pipeline, part of the Southern Gas Corridor that Azerbaijan is building to pump gas from the Caspian Sea to Turkey, if Azerbaijan was kicked out of the EITI.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kazakh economy minister says the worst is past

ALMATY, OCT. 25 2016 (The Conway Bulletin) — Kazakhstan’s economy minister Kuandyk Bishimbayev said that the worst of an economic downturn linked to a drop in oil prices and a recession in Russia had passed, the most significant upbeat statement from the Kazakh government in two years.

Specifically, Mr Bishimbayev said that the free float of the tenge last year, which triggered a collapse in its value, had been painful but was now driving the economy and making business more competitive.

“We believe that the most difficult period has been passed for Kazakhstan’s economy. We estimate that the period was in the first quarter of this year, it was the time of the lowest oil prices,” he said.

“There has been steady growth in the economy since June this year.”

Despite Mr Bishimbayev’s upbeat message, the data points to a still sluggish economy.

Economists have predicted that Kazakhstan’s GDP growth will contract this year to nearly zero. But with oil prices pushing back up to $55/barrel, double their value from the start of the year, officials have adopted a more upbeat narrative, even if caveats are dropped in.

Talking to parliament the following day, Mr Bishimbayev said that a more efficient tax collection system was needed to increase revenues from smaller businesses which had grown used to avoiding paying VAT and other taxes.

“If we want to continue to develop our systems, of course, a certain increase in the tax burden is needed, but not at the expense of those companies which already pay full taxes but at the expense of those who work outside the system,” media quoted him as saying.

Specifically, he said a third of small businesses don’t pay their full taxes.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kazakh businessman buys Turkish companies

OCT. 24 2016 (The Conway Bulletin) — Nurlan Saurambayev, CEO of SAT & Co, a Kazakh industrial conglomerate, bought two of the company’s Turkish subsidiaries, SAT&Co Holding A.S. and SAT&Co Madencilik A.S. for an undisclosed amount. Powerful businessman Kenes Rakishev owns 77.7% in SAT & Co. Mr Rakishev had increased his stake in late 2015, after forcing former CEO Rollan Mussinov to step down. Mr Saurambayev was appointed CEO in October 2015.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kazakhstan energy company posts 12% fall in oil output

OCT. 26 2016 (The Conway Bulletin) — Kazakhstan-focused energy company Nostrum Oil & Gas posted a 12% fall in oil output in the first nine months of 2016, compared to the daily average it maintained in the same period last year. Lower production and sustained low oil prices meant that revenues in Jan.-Sept. 2016 fell by 35%, compared to last year.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

China wants tourism investment in Kazakhstan

OCT. 24 2016 (The Conway Bulletin) — China wants to invest $11b in developing tourism on the banks of Lake Baikal in southern Kazakhstan, media reported. It said that a memorandum of understanding had been signed between two companies to start exploring the best way to invest the Chinese cash. Attracting Chinese tourist to Lake Baikal would be a potential boom for the area.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kazakhstan seeks extradition of police officer

OCT. 24 2016 (The Conway Bulletin) — Kazakhstan is seeking the extradition of a former mid-ranking police officer based in Almaty who they say headed a crime ring that stole luxury cars from Moscow and resold them in Kazakh cities. The allegations show the extent of corruption within Kazakhstan’s police force. Prosecutors said that the corrupt police officer and his gang stole 500 cars over 10 years. Each car was worth between $50,000 and $120,000.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kazkom rebrands

OCT. 21 2016 (The Conway Bulletin) — Kazkommertsbank, one of Kazakhstan’s largest banks, rebranded to Qazkom. The bank’s management chose its 25th anniversary to introduce the new branding. Kenes Rakishev, a powerful businessman with ties to the elite, owns, directly and indirectly, 71% of Qazkom. Mr Rakishev has gradually increased his shareholding, essentially taking it over from founder Nurzhan Subkhanberdin last year.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kazakh weightlifters stripped of gold medals

OCT. 27 2016 (The Conway Bulletin) — Three Kazakh women weightlifters were stripped of their 2012 Olympic gold medals after new tests showed that they had used banned drugs. The three Kazakh weightlifters were Zulfiya Chinshanlo, Maiya Maneza and Svetlana Podobedova. The international weightlifting authorities are now considering banning Kazakhstan from all competitions.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kazakh police block rallies for land activists

ALMATY, OCT. 23 2016 (The Conway Bulletin) — Police in Kazakhstan blocked demonstrations in support of two imprisoned organisers of protests earlier this year against proposed changes to the country’s land code.

The two land activists, Maks Bokayev and Talgat Ayan, have been on trial in Atyrau since Oct. 12 accused of trying to organise a coup, in one of the most highly-charged and politically sensitive trials this year. The demonstrations that they are accused of organising in March attracted wide popularity and spread across Kazakhstan, unnerving the government.

Apparently worried that the high- profile nature of the trial and the latent support for the defendants might trigger another round of mass protests, the authorities have been rounding up people gathering in support of Mr Bokayev and Mr Ayan.

Local media has reported that several people have been detained trying to attend these rallies and one activist said that he was beaten up by unknown men shortly after attending a rally in Atyrau.

For supporters of Mr Bokayev and Mr Ayan, the trial is a sham.

Bakhytzhan Toregozhina, a human rights activist, told The Conway Bulletin that she thought it was a purely political process.

“The judge pretends that she is neutral and listens carefully to both sides but this is a regular political trial in an authoritarian country, nothing new,” she said.

The authorities, though, have said the two men are coup plotters who had teamed up with Tokhtar Tuleshov, a millionaire brewery owner from Shymkent in southern Kazakhstan. Mr Tuleshov has been detained since January and is also charged with a coup attempt.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)