US embassy cable - 05ALMATY3296

C O N F I D E N T I A L ALMATY 003296 
 
SIPDIS 
 
 
DEPT FOR EB/ESC; EUR/SNEC (MANN); EUR/CACEN (MUDGE) 
 
E.O. 12958: DECL: 09/11/2015 
TAGS: ENRG, EPET, IN, KZ, ECONOMIC, Energy 
SUBJECT: KAZAKHSTAN OFFICIAL OUTLINES DISPOSITION OF 
PETROKAZAKHSTAN ASSETS 
 
REF: A. ALMATY 3075 
     B. ALMATY 3143 
 
Classified By: POEC CHIEF DEBORAH MENNUTI REASONS 1.4(B) and (D) 
 
1. (C) Summary:  A well-placed source in the state-owned oil 
company, KazMunaiGas (KMG), recently told Econoff that KMG 
would exercise its pre-emptive rights to purchase parts of 
PetroKazakhstan (PK) once the Canadian company's sale to the 
PetroChina was approved by PK shareholders (reftels). 
According to this plan, KMG would purchase the Shymkent 
refinery and PK's share of the Kazgermunai joint-venture 
(JV); LUKOIL would end up with PK's North Kumkol field; and 
the Chinese CNPC-SINOPEC JV would retain PK's biggest 
producer, the South Kumkol field.  End Summary. 
 
2. (C) In a September 8 meeting with Econoff, Sabr S. 
Yessimbekov (strictly protect), Executive Director of the 
Transportation Infrastructure division of KMG, outlined his 
expectations of the ultimate disposition of PetroKazakhstan's 
(PK) assets.  Yessimbekov indicated that, once PK's sale to 
"PetroChina"  was approved by shareholders in mid-October, 
the GOK would use its pre-emptive rights to purchase parts of 
PK, notably the Shymkent refinery.  The Chinese, he noted, 
had asked that the refinery be owned in thirds by KMG, CNPC, 
and SINOPEC, but KMG "would take it all." 
 
3. (C) KMG would also take over PK's interest in the 
"Kazgermunai" fields, previously a 50-percent PK joint 
venture (JV) with Germany's RWE-DEA AG (25%), Erdol-Erdgas 
Gommern (17.5%) and the International Finance Corporation 
(7.5%). (Note: A western oilman who looked at Kazgermunai 
said the field is "a gem" and could operate at about 
60-70,000 bpd, up from its present 46,000. End Note)  LUKOIL 
would purchase its PK partner's 50% share in the JV "Turgai 
Petroleum."  Finally, CNPC and SINOPEC would keep PK's 
biggest producer, the South Kumkol field, previously 
wholly-owned by the Canadian company. 
 
4. (C) Yessimbekov predicted that there would be no public 
announcement of the planned KMG purchase of PK assets until 
after PK shareholders had voted on the sale of the company to 
PetroChina.  The announcement might be delayed further after 
that, while KMG "negotiated the details with the Chinese." 
(Note: The biggest detail, presumably, would be price.  On 
September 12 Interfax-Kazakhstan quoted an unnamed high 
government official as suggesting that "(buying) even a small 
block of shares in PetroKazakhstan would mean us having to 
mobilize considerable funds quickly, otherwise we'd have to 
seek significant price concessions from CNPC based on mutual 
strategic cooperation."  End Note.) 
 
5. (C) Comment:  This division of PK's assets would make 
sense, given the actors' economic interests and past 
politics.  Many analysts believe that LUKOIL cooperated with 
the GOK in launching legal actions against PK to soften the 
latter's stock price for takeover; Turgai Petroleum's North 
Kumkol field would be the logical payoff.  KMG would get PK's 
refinery, which the GOK has reportedly long regretted 
selling.  The Chinese, of course, would be left with PK's 
biggest producer, the South Kumkol field, conveniently 
located near the Atasu-Alashankou pipeline.  End Comment. 
ORDWAY 
 
 
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