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Kazakhstan: Privatization Panel Wrestles With Gas Route

By Merkhat Sharipzahn

Almaty, 7 November 1996 (RFE/RL) -- Privatization authorities in Kazakhstan will soon call for tenders for the sale of the state gas transportation companies Alaugaz and Kazakhgaz.

Our correspondent in Almaty reports the Interministerial Commission on privatization of oil and gas industrial complexes has already held three sessions to discuss problems involved in the sale.

He reports that plans are in hand to merge the two companies before offering them to foreign purchasers. Alaugaz, formed in 1993 on the base of the previous Soviet-era company Kazakhgazifikatsiya, buys, transports and supplies natural gas to regions of southern and western Kazakhstan. Kazakhgaz is now largely moribund.

Western companies like Price Waterhouse and Paribas bank are involved in the privatization in various capacities. Kazakh officials say major international concerns have expressed interest in buying the two gas companies, but they won't divulge any names, nor give statistics on Alaugaz or Kazakhgaz ahead of the call for tenders.

Apart from working out merger details, the privatization panel has a much bigger problem to solve. It wants to decide whether a new pipeline should be built which would bypass the territory of neighboring Kyrgyzstan.

The existing 794 kilomter-long Buhara-Almaty pipeline, which joins the Uzbekistani City of Buhara with Kazakh capital Almaty, crosses Kyrgyz territory at two points. In all, 149 kilometersof the pipeline lies inside Kyrgyzstan.

One result of this is that gas consumers in Almaty experience a variable level of supply depending on volume being taken out by consumers in Kyrgyzstan. Our correspondent reports that members of the Interministerial privatization panel are pondering two possible solutions. The first is construction of a new pipeline which would not cross Kyrgyzstan's borders.

The second is to create a cooperative effort between Alaugaz and Kyrgyzgaz of Kyrgyzstan, aimed at stabilizing the flow of gas through the existing pipe. At present the delivery is free, and Kyrgyz users tend to over-consume the gas. The Kazakh side reasons that if Alaugaz imposed a charge of $1.50 per 1,000 cubic metres of gas deliveries to Kyrgyzgas, this would compel Kyrgyzgas to bring its consumers under control. Kyrgyzgas would levy similar charges on Alaugaz transits.

If the commission decides to choose the first variant, the length of the required new section of the pipeline circumventing Kyrgyzstan would be 152 kilometers. Construction costs are estimated at $820,000 per kilometer, bringing general costs of the project to about $150 million. The interests buying Alaugaz would be expected to carry out these capital works.

The second variant, namely regulating the gas flow, is of course much cheaper. However, some costs are involved even in that course of action. The existing pipeline which crosses Kyrgyzstan was built in the years 1961-1971. According to data provided by Kazakh specialists, at least 30 percent of the pipe is in drastic need of repair. The cost of this refurbishment would be around $37 million.