Saturday, 13 July 2013

Kazakhstan and the UK Launch Strategic Partnership

Published in Field Reports

by Georgiy Voloshin (07/10/2013 issue of the CACI Analyst)

On June 30 and July 1, British Prime Minister David Cameron paid his first official visit to Kazakhstan. This was also the first ever visit of a head of the British government to this Central Asian country. Accompanied by Kazakhstan’s President Nursultan Nazarbayev, Cameron took part in the inauguration of an oil-processing plant off the Caspian coast in the Atyrau region. The launch of this industrial facility whose construction had lasted for more than eight years coincides with the resolution of a months-long conundrum surrounding the Kashagan oilfield, one of the largest oil deposits in the world discovered during the last 40 years.

On July 2, Kazakhstan’s Ministry of Oil and Gas officially announced its intention to buy an 8.4 percent stake in Kashagan from the U.S. energy company ConocoPhillips which had earlier stated its desire to leave Kazakhstan in November 2012. While India’s state-owned oil and gas firm ONGC Videsh Ltd was considered as a major candidate for Conoco’s replacement, rumors have circulated that Kazakhstan’s Government prefers China National Petroleum Corporation, due to a special partnership between Astana and Beijing. Currently, the Kashagan deposit is operated by an international consortium comprised of seven partners, including the Anglo-Dutch multinational company Royal Dutch Shell.

Given the fact that the launch of production at Kashagan was already postponed several times between 2005 and early 2013, Kazakhstani authorities and foreign investors are all interested in accelerating the last stage of the preparatory phase currently underway. Therefore, Cameron’s visit was not only an additional high-level effort to lobby British commercial interests in Kazakhstan’s energy sector but also a gesture of reassurance directed toward Shell and dozens of smaller service companies from the UK. While the inauguration of the Bolashak plant, which may process 450,000 barrels of oil and 8.8 million cubic meters of natural gas per day, has been hailed as a new sign of progress on the way to the much-expected start of production, more hurdles still have to be cleared before Kashagan becomes operational in the second half of 2013.

During his subsequent visit to Astana, David Cameron also put his signature on the strategic partnership agreement between the UK and Kazakhstan. Although Great Britain ranks third in terms of foreign direct investment in Kazakhstan, behind the U.S. and the Netherlands, other European countries such as France, Germany, and Spain have been quicker to recognize Kazakhstan’s strategic potential and to respectively formalize enhanced cooperation treaties. However, London lately moved further in the same direction by including Kazakhstan among the 14 most attractive trade partners for the near future. Last year, the trade turnover between the two countries reached US$ 2.3 billion, with over 600 UK-registered companies present in Kazakhstan.

The British Prime Minister’s two-day visit to Kazakhstan also allowed the signing of 14 investment agreements worth over US$ 1 billion. Thus, Kazakhstan’s Ministry of Industry and New Technologies concluded a partnership with SUN Gold for the construction of an ore-processing plant in the Aktobe region in the country’s west. Another agreement signed between the Industry Ministry and Rio Tinto paves the way for the establishment of the Geological Research Center as part of the technology transfer in the extracting field. In its turn, KazGeology will soon benefit from the technical expertise of Dando Drilling International entrusted with the construction of an assembly line for drilling installations. Another business deal concerns future cooperation between Kazakh Telecom and Weightless International in the conception and development of wireless communications.

Overall, David Cameron’s business delegation included over 30 companies. In his welcome address before the start of the Kazakh-British business forum, President Nazarbayev invited the British business community to invest in sectors other than oil and gas or mining and promised investment incentives aimed at further diversification of the national economy.

Finally, the two leaders touched upon the security situation in Afghanistan where the incipient peace talks between the Afghan government and coalition troops and the Taliban has already encountered serious problems. In this regard, David Cameron additionally requested the Kazakhstani side to ratify the UK-Kazakhstani land transit agreement signed by the two countries’ defense ministries last February. Nazarbayev had already ratified a similar agreement concerning the air transit of British military personnel and equipment from Afghanistan on June 15.

London remains one of Kazakhstan’s most active European partners in the field of military cooperation, while Kazakhstani soldiers and officers frequently travel to the UK to acquire professional training. One of Nazarbayev’s grandchildren, Aisultan, graduated from the Royal Military Academy at Sandhurst in 2009.

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