Kazakhstan Raises Oil Venture Concerns With China

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Kazakhstan Raises Oil Venture Concerns With China

ALMATY, Jan 22, 2000 -- (Reuters) Kazakhstan has formally approached China's state oil company to discuss problems including job losses and falling production at its troubled Aktobemunaigaz venture, local media reported this week.

The venture's chairman, Wang Zhongcai, told Kazakhstan's Panorama weekly business broadsheet in an interview published on Friday that the China National Petroleum Corporation (CNPC) would continue its investment program despite the problems.

CNPC acquired a 60 percent stake in Aktobemunaigaz - located in the northwest of the vast Central Asian state - in 1997 as part of $9.5 billion of Sino-Kazakh oil deal hailed by Kazakh President Nursultan Nazarbayev as the "contract of the century."

But two major parts of the agreement - an ambitious export pipeline from Kazakhstan to China and the rehabilitation of the large Uzen oilfield - remain stalled.

Kazakhstan's official Kazakhstanskaya Pravda daily newspaper reported on Thursday that the Kazakh ambassador to Beijing, Kuanysh Sultanov, had been ordered by his government to meet senior officials from CNPC and the foreign ministry.

"During their discussions they exchanged views on the problems which have arisen (at Aktobemunaigaz)," it said.

Wang told Panorama that 1,200 local workers had been laid off in 1999 to help cope with economic difficulties at the venture, caused largely by the economic collapse in Russia where 70-80 percent of the venture's oil was sent in 1998 and 1999.

"The price of a ton (of oil) to Russia (in 1998) was just $30. This is below our production costs, and of course this had a big impact on production at Aktobemunaigaz," he said.

"In such a situation production levels last year fell sharply and there were delays in paying workers."

He said crude output last year fell to 2.3 million tons, down from 2.6 million in 1998 and less than half the levels CNPC had hoped to reach when the deal was signed. Wang forecast output of 2.5 million tons in 2000.

He said that CNPC would fulfil its contractual obligations. It paid $320 million for the stake, and has promised to invest $585 million over the first five years.

"During the last two years we invested less because of the ineffectiveness of production," Wang said. "But there are still two years to go, and we promise that during this time we will be able to fulfil our obligations in the contract."

There was little sign of progress in talks between Kazakhstan and China on rehabilitating the large Uzen field. Wang told Panorama that the two sides had failed so far to agree on "technical issues".

The promised pipeline would also require a "long term study" of oil markets and sources.


-- Martin Thompson (mthom1927@aol.com), January 22, 2000

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