THREE COUNTRIES’ INTERESTS MEET IN THE CASPIAN

 

The relations between three Caspian countries - Kazakhstan, Turkmenistan and Azerbaijan - were extremely active at the highest scale. Presidents of Turkmenistan and Kazakhstan met six times during 2007. August visit of President Ilham Aliyev of Azerbaijan to Astana could be called ‘remarkable and effective’ as well. Finally, conceptual agreements between the two countries on use of the Kazakhstan Caspian Transportation System (KCTS) were reached in Kazakhstan’s capital, and two state-owned companies fixed their key arrangements.

Presidents also agreed to raise the commodity turnover to $1bn from the current 300 million USD and ensure use of petroleum engineering facilities of Azerbaijan by Kazakhstan

“Azerbaijan for us is very interesting as a transit territory because we, as agreed before, are participating in Baku-Tbilisi-Ceyhan project and in the future we will be taking part in gas projects and railway line via Azerbaijan and Georgia. Both the countries are eager to cooperate in all fields: create joint ventures, take part in acquisition of each other’s assets and boost trade relations”, said President of Kazakhstan Nursultan Nazarbayev.

“Azerbaijan is eager to do everything to ensure free transition of Kazakhstan’s energy carriers and cargoes through our territory. We have the state-of-the-art oil&gas transportation infrastructure that runs towards European and global markets. The state-of-the-art railway infrastructure has been created, and this also can serve Kazakhstan’s interests”, said Ilham Aliyev.

 

Trans-Caspian

KazMunayGas NC JSC (KMG) and the State Oil Company of Azerbaijan Republic (SOCAR) have signed bilateral documents under the Trans-Caspian Project. KMG officials told Caspian Energy these are the Agreement of Strategic Partnership in Oil&Gas Industry and the Memorandum of Joint Implementation of Trans-Caspian Project. Thus, the signed agreements state the mutual intention of the Parties to proceed with mutually beneficial cooperation in the oil&gas industry and contain the related conventions on transportation and transit of Kazakhstan’s petroleum, refining and petrochemistry as well as joint use of SOCAR’s oil&gas infrastructure.

The Memorandum is the next step in the Trans-Caspian Project whose provisions were set forth in the Agreement for Assistance and Support to Oil Transportation from the Republic of Kazakhstan across the Caspian Sea and Azerbaijan to the international markets using Heydar Aliyev Baku-Tbilisi-Ceyhan system, signed in June 2006 by Presidents Ilham Aliyev and Nursultan Nazarbayev.

SOCAR’s President Rovnag Abdullayev told Kazakh journalists ‘everything will be done on a parity basis, 50/50. This is the construction of a port of Kuryk (Kazakhstan), joint building of tankers, installation of transfer system, terminals in Baku and a tie-up to Baku-Tbilisi-Ceyhan pipeline (BTC).’ As a result, Trans-Caspian system is a part of Kazakhstan Caspian Transportation System (KCTS) which is being designed. The Kazakhstan Caspian Transportation System is scheduled to transfer 500kbd (23 million tons annually) of crude at the initial stage with the subsequent increase to 750-1,200kbd (35-56 million tons annually).

KazMunayGas and SOCAR are discussing the future construction of a pipeline from Baku towards the Black Sea to transfer Kazakhstan’s crude to world markets. “We are now completing the project to raise BTC’s throughput to 1.2mbd and we already have a program to bring it to 1.8mbd. Further, when we’ll be having more crude from Kazakhstan, its throughput shall be raised once more. We can install a pipeline from Baku to the Black Sea”, said Mr. Abdullayev.

Previously, KMG was not intending to allow SOCAR to creation of infrastructure facilities on Kazakh coast and it planned to build its own tanker fleet similar to Azerbaijan’s Caspian Shipping Company. The parties are likely to have achieved a compromise on the issue of building 60,000 ton tankers to make the project cost effective. Earlier foreign investors of Kazakh oil projects were going to build their port facilities in Azerbaijan. Total of France, ENI and other companies involved in Kashagan and Tengiz projects are planning to invest not less than $4bn in KCTS.

Thus, Kazakhstan allows Azerbaijani investors to install and run future infrastructure on its territory. In response, Azerbaijan is improving Kazakh oil transit conditions. It is noteworthy that in July KMG redeemed port of Batumi in Georgia and SOCAR acquired Georgian port of Kulevi. Both ports badly need East Caspian crude. So far, KMG and SOCAR agreed on coordinated amounts of oil shipping from Batumi and Kulevi.

At this stage, KCTS was financially supported by the United States. The grant agreement was signed in August to draw the feasibility study of the Trans-Caspian Pipeline project at the Foreign Affairs Ministry of Azerbaijan. Experts of the company to get selected under the $1.7 million project shall perform studies of two pipelines. These are the pipelines designed to transfer Kazakh oil (towards Baku-Tbilisi-Ceyhan oil pipeline) and natural gas of Kazakhstan and other countries of the region via Azerbaijan.

 

Unified gas policy

The practical implementation of Caspian Gas Pipeline Project and North-South Transportation Corridor were the main topics of talks (September 11-12) between President of Kazakhstan Nursultan Nazarbayev and President of Turkmenistan Gurbanguly Berdimuhammedov in Ashgabat.

“I really enjoy each of our meetings”, said President of Turkmenistan Gurbanguly Berdimuhammedov during the meeting with his Kazakhstan counterpart Nursultan Nazarbayev started face-to-face and continued with participation of governmental officials. The Turkmenistan’s leader said he had found not an associate but a real friend in person of Nursultan Nazarbayev. Kazakhstan’s leader stated his confidence that the current meeting would become a new step on the path of trustworthy, fruitful and neighborly dialog established between the two countries.

The parties advocated the increase of trade turnover between the countries and expansion of business partnership, chiefly through the increase of Kazakhstan’s companies presence in major investment projects in Turkmenistan. As to the cooperation in the agriculture sector, Nursultan Nazarbayev stated Kazakhstan’s readiness to consider import of Turkmen cotton.

Cooperation in gas transfer to outer markets was one of center topics of the talks held between Presidents of Turkmenistan and Kazakhstan on September 11. Nazarbayev said Kazakhstan was ready to supply energy resources not only in northern but also in all other directions. According to Turkmenistan State Information Agency (TDH), ‘both presidents said of full uniformity of views and approaches to this problem.’

During the conversation, Gurbanguly Berdimuhammedov and Nursultan Nazarbayev dwelt on implementation of the Caspian Gas Pipeline Project together with Russia. KazInform reports Kazakhstan’s President saying that the work on the relevant agreement would be completed this month. Four governmental meetings on preparation to construction of the Caspian gas pipeline were held in Kazakhstan, he said.

The parties also discussed already launched Turkmenistan-China gas pipeline project to run via Kazakhstan. “Our plans include other transportation projects and one across the Caspian Sea”, the TDH release says.

The Kazakhstan’s President suggested forming a Coordination Board on the level of ministers to coordinate energy cooperation and implementation of joint projects.

 

All together

Turkmenistan invited Kazakhstan’s partners to participate in a number of major investment projects in Turkmenistan, onshore Caspian Sea. According to Gurbanguly Berdimuhammedov, in general Turkmenistan had established and is currently running nine entities with Kazakh capital participation. The Turkmenistan’s leader stated confidence their number would be growing up along the extension of major investment projects in the country.

According to www.turkmenistan.ru, among such projects were named Avaza National Tourism Zone, oil&gas fields on the Turkmen shelf of the Caspian Sea, a seaport and an airport in Turkmenbashi and a cement plant in the Balkan Velayet.

Nursultan Nazarbayev stated practical interest of Kazakhstan’s largest companies and financial structures in the said projects and sounded his country’s readiness to launch talks on this issue. “We are ready to open up representative offices of banks, funds and industrial companies in Ashgabat as soon as possible”, he said.

In turn, Head of Kazakhstan invited Turkmen partners to the Kazakhstan’s market, in particular to the textile sector.

The Russian oil community regards the Transcaspian transit and Turkmenistan-Kazakhstan pipeline projects as an alternative to the CPC and the Burgas-Alexandropoulos trunk-pipeline. Both groups of projects are intended for Caspian oil export bypassing the Bosporus.

Anyhow, the idea of CPC’s expanding has had no promotion for several years because of aggravated opposition between Russia, which is displeased with the route’s inefficiency, and western shareholders. That is why Astana is re-routing its big oil export towards the Caucasus, which is scheduled for 2015 in the volume of up to 100 million tons per annum with stable output growth at Kashagan.

It will be preceded, most likely, by the surge of activity in the Caspian-Caucasian business area. In turn, Turkmenistan and Kazakhstan share the unanimity of views in the export policy.

Astana and Baku signed not only oil documents but also securities-related agreements facilitating the banks’ operation. Khalykbank and TuranAlam Bank financial structures are about to start working in Azerbaijan in the near future.

Kavkaztransservis and Azerbaijan Investment Company will take part in joint setting up of CKTS. Azerbaijan, Kazakhstan and Turkmenistan have common interests in the Caspian Sea. Therefore, trilateral companies and joint ventures might appear in the near future to develop Caspian Sea resources.