Having the world’s 13^th largest proven on-shore oil and gas reserves, Kazakhstan oil companies attract a lot of interest from foreign investors. The national holding company KazakhOil estimates the country’s geological and recoverable reserves to be as much as 15.3 and 45.0 billion bbl. The vast majority of reserves (95%) are concentrated in Western Kazakhstan, although a substantial deposit has been discovered in the Kumkhol fields of Southern Kazakhstan.

The potential oil reserves of the entire Caspian Sea are estimated to exceed 200 billion bbl. Kazakhstan’s estimated Caspian reserves are 73 billion bbl, thus making Kazakhstan one of the world’s largest oil economies.

The largest of Kazakhstan’s oil companies, such as MangistauMunaiGas, AktobeMunaiGas, TengizMunaiGas, EmbaMunaiGas have a portion of their equities traded on both the Stock Exchange and OTC markets.

In transportation, the major areas for investment are oil export pipelines. Currently, the Government and oil companies are discussing six possible routes for transporting Kazakhstan’s oil to the world market.

As far as oil refinery capacities are concerned, Kazakhstan has three refineries, located in Shymkent, Pavlodar, and Atyrau. The total annual capacity of these refineries is over 21 million tonnes of crude oil.

Kazakhstan has the world's largest reserves of zinc, wolfram, molybdenum, barite, and the second largest deposits of lead, chrome, and silver. It also possesses the world's third largest reserves of copper and manganese and is rich in many other metals.

Production facilities in the steel industry include one of the world’s largest steelworks, Ispat-Karmet, as well as Aksu and Aktobe Ferrous Compounds Plants (Aksu’s plant is one of the world’s largest), and the famous Sokolovsko-Sarbaiski GPO for iron concentrate.

The non-ferrous metal industry is represented Kazakhstan’s largest copper producer JezkazganTsvetMet (70% of the country’s copper output), KazZinc (the only producer of lead and zinc in the country), Ust Kamenogorsk Titanium and Magnesium Plant (100% of the country’s output and export of titanium). All these companies are scheduled for privatisation of state share packages under the blue chip programme.

Kazakhstan’s telecommunications sector is characterised by the monopoly of JSC Kazakhtelecom. This company provides a complete range of telecom services: telephone communications (voice transfer), data transfer, telegraph exchange, satellite communications, cellular and paging communications and fixed-wireline communications.

Presently, the telecommunication system comprises urban and rural telephone networks consisting of over two million lines; automatic long-distance telephone connections to international networks; cellular networks; a wide network of cable, coaxial, fibre-optic, microwave relay lines; satellite earth stations; over 5,000 TV transmitters and transponders.

The sector suffers from obsolete equipment and technology inherited from USSR telecoms network. This has certain positive features, though, ensuring fast and comprehensive connection of all regions of Kazakhstan and unobstructed exit to international lines.

The power sector of Kazakhstan was one of the most rapidly privatised industries of the Republic. Presently, 49% of power enterprises are privatised.

The sector is characterised by under-utilised capacity, i.e. enormous potential growth. With 18,240 MW of installed capacity, Kazakhstani power plants generated 52 billion kWh in 1997, which is 12% less than in 1996. The majority of electricity (85%) is generated by thermal power stations. The 1989 generation level of 89.7 billion kWh is considered to be the peak of production, underpinning potential growth of the power sector. The peak of electricity consumption was reached in 1990 when it reached 104.7 billion kWh, subsequently declining gradually in tandem with the decline in manufacturing production.

The location of most major power producers is predetermined by the location of large industrial complexes, which are the main power consumers. Among the consumers are Ispat-Karmet (steel), Kazzinc (zinc), Kazakhmys (copper), Kazchrome (chromium). After several years' decline, considerable improvement of their position in terms of production, profitability and solvency has been observed over the last two years. The companies' development is gaining momentum, which, among other things, can be seen as a prerequisite of rapid development in the power sector.

One more factor that contributes to our belief in future power sector growth is the positive economic growth of the Republic. In 1997 GDP growth reached 2% and is expected to increase further by 3% over the current year. Industrial growth 0.3% in 1996 indicated a tendency towards growth and indeed reached 2.5% in 1997. This increase may become even more rapid in 1998 with an expected rise of 3.5%. All these developments will inevitably lead to increased electricity demand and power consumption. During 1998 the power generation level will increase by 2.5-3% to keep up with ongoing industrial growth.

By the year 2000, export pipelines will be brought into operation, which is bound to boost oil and gas sector development in Kazakhstan, resulting in further growth of demand for electrical energy.

Kazkommerts Securities plans to publish detailed research reports on ferrous metals, oil & gas, and power industries, as well as a series of publications on selected companies of special interest for foreign portfolio investors (MangistauMunaiGas, AktobeMunaiGas, Shymkent Oil Refinery, etc). For further information please contact us at the address indicated at the end of the brochure.