OIL BRANCH OF FRIENDSHIP

Intensive growth of oil production and delivery from the Caspian region and, in particular, from Kazakhstan gets strategic importance for consumers of both the European and Southeast Asian regions.

In this connection, the companies working in oil sphere aspire to the most favorable direction of energy resources transportation to the consumer markets.

KazTransOil CJSC as the biggest oil transportation enterprise of the Republic of Kazakhstan will do a scale work to create new oil eхport routes.

Closed Joint Stock Company KazTransOil was established in April 1997 by Decision of the Government of Kazakhstan Republic with the purpose of maintenance and observance of Kazakhstan national interests in questions of oil transportation, export and import, optimization of branch enterprise management, attraction of investments, and realization of a uniform tariff policy for all the main oil pipelines in the country's territory. Since January 2002 the only shareholder of the company is National Company KazMunayGas CJSC.

Currently natural monopolist KazTransOil has a powerful ramified network of main pipelines providing transportation of about 80% of oil produced in Kazakhstan. The company transports Caspian oil both for export, and to oil refining plants of Kazakhstan.

Despite of the leading position, which KazTransOil has today in transportation of Kazakhstan oil, the company is actively working on offering oil industrialists the most competitive routes of oil delivery to external markets.

KazTransOil bases on multi-vector principles of export direction choice and max efficiency of use of pipeline systems.

By virtue of geographical affinity KazTransOil considers cooperation with Chinese companies as one of the most priority issues of the present time. So under forecasts of international experts from 2010 till 2020 in China average oil consumption level will be 355-500 mln tons, while the deficiency will increase from 90 to 240 mln tons. Therefore opportunity of land delivery of Kazakhstan crude hydrocarbon is the determinative factor, as it is the most reliable and one of the least expensive ways of transportation.

For our republic the Chinese market is also one of the most perspective. In due time the decision of Kazakhstan and China about the idea of constructing an oil pipeline caused an international sensation. Then experts started talking about rapprochement of the two countries not only in the economic, but also possible political and new geopolitical fields.

The agreement on cooperation in the field of oil and gas between the governments of the Republic of Kazakhstan and Chinese People's Republic achieved at the meeting in September 1997 marked the beginning of cooperation of the two countries in oil transportation sphere.

Then the RK Ministry of Energy and Natural Resources and Chinese National Oil and Gas Corporation (CNOGC) concluded the General agreement "On the field development projects and construction of the oil line".

After the agreements on joint researches on substantiation of investments in stage-by-stage construction of the Kazakhstan-China oil line were signed in June 2003 between the NC KazMunayGas CJSC and CNOGC, the work on the project activated.

This theme continued already in July of last year, when the Chinese National Corporation for Oil and Gas Prospecting and Development and NC KazMunayGas CJSC signed the memorandum on acceleration of Kazakhstan-China oil line first-turn construction and study of the opportunity of constructing the gas line.

Kazakhstan and China plan to commence construction of Atasu-Alashankou site oil pipeline in summer 2004.

The Atasu-Alashankou site of about 1000 km extent lays from the Atasu station bulk-oil railway overpass in the Karaganda area till the border with China in the area of Druzba-Alashankou railway terminal. Kazakhstan side believes that the Atasu-Alashankou site may be constructed for two years from the moment construction work begins.

Under the agreement between KMG and CNOGC, construction of the oil line in the Kenkiyak-Aralsk-Kumkol site is considered the second stage of development of Kazakhstan-China transnational oil pipeline, with prospective completion term in 2011. Currently KTO has completed preparation of Investment Substantiation (IS). IS estimated results show economic efficiency and commercial attractiveness of construction of the oil line at 20 mln tons per year swap. With commissioning of the given site throughput of the Kazakhstan-China oil line system will be brought to 20 mln tons per year.

Realization of the given oil line will ensure access of the oil extracted in Kazakhstan sector of the Caspian sea to the dynamically developing market of China. Thus flexible and multi-vector transportation of our oil for export will be achieved.

First CNOGC vice-president, chairman of the Board of Directors of CNPC-AktobeMunayGas U Yaoven asserts that the oil line's export potential may be increased to 50 mln tons per year. Mr. Yaoven said this at the meeting with the Kazakhstan president Nursultan Nazarbayev at late March of this year. Today the Chinese side has finished all the design and exploration works on construction of the Atasu-Alashankou site.

It is supposed that KazTransOil CJSC will be the operator on operation and maintenance service of the projected oil pipeline. And it is not casual, for KTO has a wide experience of main pipeline operation and has highly skilled group of experts.

Some Russian oil-producing companies working mainly in the Western-Siberian region have also displayed interest to the Kazakhstan-Chinese project. They offer Kazakhstan partners to use capacities of the Omsk-Pavlodar-Atasu oil line.

Thus, already today analysts assert that construction of the oil pipeline in China is one of the most probable Kazakhstan projects for economic efficiency. It is an example of successful bilateral cooperation of the neighboring countries. Judging by first results both the sides aspire to work for future.

In turn, realization of the given project will allow connecting oil line systems of three countries: Kazakhstan, Russia and China, which may become a strong basis for mutually advantageous partnership. Thus, integration of oil transportation infrastructure of Kazakhstan and China remains one of the most important directions of the KazTransOil company's activity in perspective. This scheme will also allow max diversification of Kazakhstan oil transportation direction and use of the republic's transit potential caused by its geostrategic position.