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Big Plans For Kazakhstan's Oil

Kazakhstan has far-reaching hopes for the future of its oil industry. At a 23 February press briefing, top executives at the state-owned KazMunaiGaz oil and gas company made it clear that those ambitions stretch from Turkey to China.

KazMunaiGaz President Uzakbai Karabalin confirmed that his company plans to plug into the Baku-Tbilisi-Ceyhan (BTC) pipeline, reported on 23 February. Noting that talks are under way between the governments of Azerbaijan and Kazakhstan, Karabalin said that he hopes the major issues can be resolved "soon." He added that a "very careful approach" is required, since matters of "legislation and taxation" are involved. Azerbaijan State Oil Company President Natik Aliyev (no relation to President Ilham Aliyev) explained that since Azerbaijan's parliament customarily ratifies such agreements, Azerbaijan may ask Kazakhstan's parliament to do the same, Azerbaijan's online newspaper "Echo" reported on 24 February.

Once the necessary agreements are in place Kazakhstan intends to link up with BTC through a new port at Kuryk. Kuryk, in turn, would itself serve as a link to another port in Kazakhstan, Aktau, 76 kilometers to the northwest. Eventually, oil from Kazakhstan's Kashagan field would flow from Aktau to Kuryk for shipment across the Caspian Sea to Baku and the BTC. According to "International Oil Daily," the port at Kuryk should be ready by the time the first oil begins to flow from Kashagan in 2007 or 2008.

But western export routes are only part of the picture. Karabalin also detailed recent movement on plans for a pipeline to China. He told reporters that KazMunaiGaz has submitted a feasibility study for a 1,300-kilometer-long stretch of pipeline from Atasu in central Kazakhstan to the Alashankou railroad terminal on the Chinese border, Interfax-Kazakhstan reported on 24 February. Once the study is approved construction could begin as early as the summer of 2004, the BBC reported. Kazakh specialists have expressed confidence that it will only take two years to build the Atasu-Alashankou leg of what will eventually be a 3,000-kilometer pipeline, an estimate that could prove overly optimistic.

Grand plans provide ample grist for skeptics' mills. Schemes to integrate Kazakhstan into BTC have a checkered history. Kazakh President Nursultan Nazarbaev promised at a 1999 summit in Istanbul to pump his country's oil through BTC, for example, but reneged on the pledge. BTC itself has a long history of squabbles and delays (although it is currently on schedule for completion in 2005). On the eastern front, a pipeline to China presents the inherent risk of project tethered to a single customer, who then wields inordinate power over its captive supplier. Finally, Kazakhstan's main claim to hydrocarbon fame -- its giant Kashagan field -- has itself witnessed its share of scandals and setbacks. The project's participants are expected to approve what could be a $36 billion development plan for Kashagan this week, Bloomberg reported on 24 February, but the first oil may not flow until 2008.

Still, the long-term outlook is encouraging. Kazakhstan hopes to triple its oil output to 3.2 million barrels a day by 2015. The date could prove propitious. A 24 February article in "The New York Times" paints a picture of gradually rising world demand and increasingly tired oil fields in crucial producer Saudi Arabia. Edward O. Price Jr., a former Saudi Aramco and Chevron executive, told the newspaper that the world can only expect a "few years" of 12-million-barrels-per-day production from the Saudis. By 2015, Price "expects global oil markets to be in short supply."