CNPC (China) plans to invest $120 mln into Kazakhstan this year

/IRBIS, Apr.3, 00/ - As REUTERS informs, Chinese national petroleum corporation (CNPC), which controls Kazakhstani oil producing company Aktobemunaigas, plans to eliminate disagreements with the government and local authorities and invest $120 mln into the country this year. Vice-president of the company said there have been some shortcomings, and that they have been eliminated and they have come to mutual understanding between local authorities, the government and the corporation. He also said the government has been worried about a decline in investments and production, as well as mass lay-offs of the workers. He added prime-minister of Kazakhstan has asked not to lay-off workers any more and to increase investments and oil production. It is said that the government promised to meet its obligations on purchase- sale agreement and a contract signed in 1997. In addition, a memorandum on economic cooperation was signed with the authorities of Aktobe region. The representative of the company said CNPC would gradually increase investments, production volume and supplies of gas to Aktobe region. Investments are said to be used for the reconstruction of Janjol gas processing plants and drilling of 20 wells. Vice-president confirmed the corporation's plans to increase oil production up to 2.5 mln tons this year from last year's 2.3 mln tons. CNPC owns controlling block of 60.3% of Aktobemunaigas shares bought for $320 mln with the promise to invest another $585 mln in next five years. The government of Kazakhstan owns 20% of the shares. He said the company had to lay off 1,700 workers to cut the production costs due to low oil prices and sales problems. This time it is planned not to lay off the workers and cut the costs further. The company is expanding the production to cut the costs. The management believes if no lay-offs take place this year the cost could go down to $45-46 per ton and it can go down even further to $40 if the production is increased up to 3 mln tons. He said production costs have fallen to $52 last year from $74 a year ago and the profit of the company has reached KZT540 mln after a some loss in 1998. However, he did not give the size of the loss. Exports quota granted to the company by the government is 500 th. tons of oil, mostly to Russia, since there is only one pipeline to the closest Orsk refinery. Kazakhstani government promised to increase the quota and further talks are expected. Transportation of oil to China is said to have reached 20% of all production, since sales price in China remains the highest for the last two and a half years. Oil is supplied to China by railroad and through substitution scheme from Russia. Some oil is supplied to Orsk refinery, an equal amount of Siberian oil is supplied to China. He said increase in transportation tariffs by KazTransOil would have a negative impact on Aktobemunaigas. The representative of the company said they wanted the tariffs to go down not up, since the customers would not pay high prices due to an increase in transportation tariffs. The company is said to begin talks with Kazakhstan temir joly and KazTransOil to work out acceptable tariffs.