"Russian Premier Mikhail Fradkov is to visit this country toward the year's end. I hope we shall come to a positive conclusion on the matter, and sign the agreement just then," Danial Ahmetov, Kazakh Prime Minister, said to Novosti today.
"[Karachaganak] gas is to be processed here in Kazakhstan. That's the point we proceed from. Don't think we are shrugging off Russia's interests. On the contrary, the Orenburg processing works [in Russia's South Urals, close to the Kazakh frontier] will receive its annual seven billion cubic meters, as usual.
"Meanwhile, we are considering Russian government initiatives-in particular, for Kazakh partnership in tentative Orenburg works updating. My country will take part only if it gets a clearly specified part on production-sharing arrangement, with a chance to export it to countries outside of the post-Soviet area. We are thoroughly considering the two available options."
As was announced on a previous occasion, Russia's Gazprom gas export monopoly has called Kazakhstan to start a joint venture basing on the Orenburg gas procession works. Kazakhstan, on its part, intends to build an analogue, with a ceiling annual capacity of ten billion cubic meters, at the Karachaganak field.
Gazprom experts roughly estimate Karachaganak construction at $1.3 billion, and gas procession costs at $25 a thousand cubic meters, with end product prices at $45-49/1,000 cu m. Otherwise, Kazakhstan will not recoup five year-long construction soon enough.
The Karachaganak project will be profitable only if it sells no less than 90 per cent of its gas to Western countries-customers, who have no gas shortages. It will be hard to find a purchaser there for an extra 10 million cu m, unless Kazakhstan elbows another exporter off the market. Russia will be the most probable of those ill-starred exporters as the West's largest purveyor out of all CIS countries.
This reasoning came from Alexander Ryazanov, Gazprom deputy board chair, as Novosti was interviewing him last month.
Incomparably more thrifty prospects are offered by the Orenburg company. It will take 18 months to two years to modernize it and increase its annual capacity by a rough eight million cubic meters, with total updating costs at $300 to 320 million, on Gazprom estimations.
Gazprom and the Kazakh-based Kazmunaigaz Co. set up a KazRosGaz joint venture in 2002. It purchases raw gas in Karachaganak for processing in Orenburg. The company processed 5.5 billion cubic meters last year, and expects to cope with seven billion throughout this.
The Karachaganak field will quite soon reach a third development stage to increase its annual output by another eight billion cubic meters.
