Silent division continues in gas sector of Kazakhstan

/IRBIS, Apr 12, 01/ - The GSRW informs, that last week KazTransGas executives presented their idea for privatizing all of the state's gas distribution companies. They proposed setting up a new company, RegionTransGaz, which would be owned by KazTransGas. The official reason for this is that although KazTransGas has cut gas transportation tariffs, gas prices are going up. KazTransGas executives claim this is the result of mismanagement by the regional gas distribution companies. For example, Almaty-Intergas, which supplies gas to Almaty, has increased its tariffs by 5% starting April this year. This measure is explained by the increase in operational costs and the need to cover losses which have been mounting up since the beginning of this year. Almaty-Intergas has no links with KazTransGas. On the contrary, the share of transportation costs in KazTransGas tariffs has fallen 2.5 times. According to KazTransGas, the creation of RegionTransGaz will make it possible to withdraw the distribution networks from the existing companies, and to have a joint tariff policy approved by the Agency for Natural Monopolies, Protection of Competition and Support for Small Businesses. Gas will still be distributed by private companies. This is expected to make it easier to monitor the expenses of market players and to cut tariffs in the future. However, the regional governors (akims) are resolutely opposed to the new gas transportation company, and it is hard to predict whether it will be possible to overcome this opposition or not. On the other hand, the akims cannot resolve the gas sector's problems by themselves. For example, disruptions in the gas supply in Uralsk (Western Kazakhstan) are due to the failings of the distribution companies. Incidentally, some distribution companies are owned by individuals because of fraud committed during the privatization program, whereas other gas distribution organizations are owned by utility companies. That is why KazTransGas insists on the need for privatization and the creation of RegionTransGaz. This is, in fact, a new phase of ownership reform in the gas sector - which explains the akims' opposition. The other important event which concerns KazTransGas is the completion of the repairs to the Central Asia-Center gas pipeline in the Mangistau region in late March this year (the pipeline exports gas to Europe via Russia). Having completed the repairs, KazTransGas is planning to upgrade the equipment. The Kazakhstani section of the gas pipeline is 824 km long. Around 120 million cubic meters of Turkmen and Uzbek gas are transported via the pipeline every day. This means it is extremely important for both Kazakhstan and its neighbors which import gas from Uzbekistan and Turkmenistan. KazTransGas is planning to increase the capacity of the pipeline to 48 billion cubic meters of gas per year. KazTransGas also intends to obtain a concession over Kyrgyzstan section of the pipeline, which links Southern Kazakhstan with Uzbekistan, especially as Kyrgyzstan has hinted that such a move would be welcomed. In this way KazTransGas, which is a relatively young company, is quickly developing and will soon become a monopolist in the gas sector. Such rapid development seems to justify the assumption that the company enjoys the support of a very important figure.