Nonetheless, in the immediate aftermath of the gas deal with Russia (see EDM, May 17), the Kazakh authorities moved to counterbalance it by raising cost estimates for a major homegrown gas processing and petrochemical project.

On May 17 the Kazakhstan Energy and Natural Resources Ministry approved a feasibility study of the petrochemical complex in Atyrau region with a total capacity of 1.2 million tons per year. In a statement the ministry also announced that the Kazakhstan Petrochemical Industries (KPI) would become the project"s operator.

Kazakhstan"s state-owned oil and gas company, KazMunayGaz (KMG), will start construction of the $5.2 billion Atyrau complex next December, the state-run Kazinform news agency quoted Raushan Sarmurzina, head of the ministry"s technology development and state-owned assets management department, as saying. The complex is expected to be completed in about 3-5 years, she said (Kazinform, Interfax, May 17).

The announcement marked a significant increase in the Atyrau project"s cost estimate. In May 2006, Kazakhstan"s President Nursultan Nazarbayev had predicted that the petrochemical complex in Atyrau region would cost $4 billion. Earlier this year Kazakhstan had announced plans to start construction of a national industrial petrochemical park in Atyrau region.

Last year, the Kazakh government moved to sign up a major international contractor to develop the Atyrau project. In March 2006, KMG and Basell signed a memorandum of understanding regarding the Atyrau petrochemical complex, which would involve the Kulsary gas extraction facility and the Atyrau plant to produce polymers.

Incidentally, Basell"s involvement in the Atyrau project would entail an indirect Russian connection. In August 2005, New York-based Access Industries, headed and owned by Russian-born billionaire Leonard Blavatnik, acquired the international petrochemical major Basell for €4.4 billion. Access Industries was part of the deal to set up TNK-PB, one of Russia"s major oil companies.

Earlier this year, Basell was reported to be mulling plans to acquire a 35% stake in Kazakhstan Petrochemical Industries (KPI) from the holding company Sat & Co. After this acquisition, Sat & Co. would continue to be the largest shareholder with 50%, while KMG would hold the other 15%.

In October 2005, the Kazakh government drafted a $7 billion national plan to develop the petrochemical sector, which envisaged building a total of nine new petrochemical plants. The new facilities would produce ethylene, propylene, styrene, benzene, polyethylene, polypropylene, polystyrene, methanol, and mono-ethylene-glycol, according to the government blueprint. The blueprint envisaged creation of some 60,000 new jobs in the petrochemical sector in the coming 15 years.

In April 2007, KMG indicated plans to build a $1.2-1.5 billion natural-gas-processing plant at Karachaganak. KMG head Uzakbai Karabalin told a government meeting that KMG would start construction of the plant in late 2008 or early 2009 and that the facility would have an annual capacity of 5-7 billion cubic meters of gas (Kazinform, April 18).

The Kazakh government was reported to be considering overseas petrochemical projects as well. In March 2007, KMG was reportedly interested in joining a $4.9 billion project to build a 300,000 barrel-per-day refinery in the Turkish Mediterranean port of Ceyhan in partnership with Calik Energy and Indian Oil. Kazakhstan"s interest in the project was understood to be connected with the possibility of transporting Kazakh crude supplies via the Baku-Tbilisi-Ceyhan pipeline.

There were also plans for Russia"s direct involvement in petrochemical and gas processing projects in Kazakhstan. In November 2005, then-Kazakh Prime Minister Daniyal Akhmetov announced that KMG and Russian oil major Lukoil planned to build a joint gas-chemical complex in the Caspian littoral region of Western Kazakhstan. It was supposed to process gas from offshore fields, jointly developed by Kazakh and Russian companies. However, neither side has announced concrete moves to implement this project.

PIN/JAMESTOWN.ORG