Interview with Kazakh Minister Shkolnik

WASHINGTON, Dec. 17 (UPI) -- United Press International obtained an exclusive interview with Vladimir Sergeevich Shkolnik, Kazkahstan's minister of Energy and Mineral Resources since January 2002. Shkolnik was in Washington attending a seminar at the Senate Dirksen office building, "Kazakhstan: Reducing Nuclear Dangers, Increasing Global Security."

Skholnik has had a long and distinguished career in the Kazakh government since the nation achieved independence in 1991. He was director general of Kazakhstan's Atomic Energy Agency from 1992 to 1994 and worked closely with both the United States and the Russian Federation to secure and dismantle the country's Soviet-era nuclear arsenal. He also served as minister of Energy, Industry and Trade. In 2000, he became deputy prime minister.

UPI: Please describe the impact and importance of Kazakh oil on the national economy. (Kazakhstan has the Caspian Sea region's largest recoverable crude oil reserves, and pumps approximately two-thirds of the roughly 1.5 million barrels per day now being produced in the region. Kazakhstan has already attracted more than $13 billion in investment in its oil industry; 2003 oil production is expected to total 364 million bbl compared with 330 million bbl in 2002 The U.S. government estimates that Kazakhstan could eventually attract up to $140 billion foreign investment in its oil infrastructure.)

Skholnik: This year Kazakhstan will produce 55 million tons of oil and gas condensate. By the year 2015 this figure will at least triple to 150 million tons per year. Oil is a significant part of the national GDP; energy production is around 50 percent of Kazakh industrial capacity. Oil consists of about 70 percent of energy production. We are now trying to diversify our economy so as not to rely on oil revenues. Revenues from oil sales will go to the non-oil sector.

Q: What are Kazakhstan's future plans for developing the Kashagan oil field? (The Kashagan field is the largest offshore field to be brought on-line in the world since the end of World War 2. the field is expected to begin production in 2006-07; its reserves are estimated at 40 billion barrels.)

A: The development of this oil field is proceeding strictly following the agreements with foreign partners; everything is laid out in the agreements.

Q: What is Kazakhstan's official position on the division of the Caspian seabed? (The collapse of the Soviet Union nullified the two treaties signed in 1921 and 1940 between it and Iran delineating Caspian maritime territory. Following the collapse of communism in 1991, five riparian nations merged around the Caspian. While Iran has held that Caspian surface and seabed should be equally apportioned at 20 percent among the five nations, Kazakhstan, Russia and Azerbaijan have argued for a proportional division based on the length of coastline. Turkmenistan's position has been inconsistent, and a final agreement on the issue has yet to be negotiated.)

A: Our position is reflected in our agreement with the Russian Federation, it is already done, and we are near to signing a similar agreement with Azerbaijan. The surface of the Caspian is common territory for all five littoral states; the seabed should be divided on the median line. We think that our position is the most reasonable, and it is already supported by Russia and Azerbaijan. We think that we will find common language with Iran and Turkmenistan.

Q: What is the Kazakh current and future position on the Baku-Tbilisi-Ceyhan pipeline? (The BTC pipeline is a $3.6 billion, 1,040-mile pipeline being built by an international consortium to transport Caspian oil. The pipeline begins in the Azeri Caspian port of Baku and runs via Georgia to terminate at the Turkish Mediterranean port of Ceyhan, capable of handling 350,000-ton tankers. It is due to be completed in 2005 and will have a capacity of one million bbl/d. Currently only Azerbaijan has committed its future production to filling the pipeline.)

A: We support this project. Fifteen percent of this project belongs to companies currently working in Kazakhstan. Total-Fina, ELF and Conoco-Phillips, maybe. We will use this pipeline when our output is sufficient, we will need this pipeline sometime around 2010.

Q: Please discuss your plans for the Kazakh tanker fleet. (In October Kazakhstan announced its intention to construct a Caspian tanker fleet. On Dec. 16 the keel for the first Kazakh tanker was laid down at Vyborg Shipyard in the Russian Federation's Leningrad District. The shipyard will build four 12,000-ton tankers for the Kazakh company Central Asia Shipping Co. Ltd for $50 million.) Kazakhstan previously had a single merchant vessel of slightly over 1,000 tons. The Azeri firm Caspar is currently the dominant Caspian crude oil shipping company.)

A: We have already agreed that we need this fleet and we have already started this business.

Q: Please describe your relationship with Transneft and Novorossiisk. (The opening of the Caspian Consortium pipeline in 2001, from western Kazakhstan's Tengiz oilfield to the Black Sea, substantially raised export capacity. Kazakhstan pumped its oil via Russia's Transneft pipeline monopoly to the Russian Black Sea port of Novorossiisk for export.)

A: We do very close business with Transneft. Each year we sign an agreement with KazOil which we shipped using Transneft and Novorossiisk and exported approximately 17 million tons of oil via Russian territory by pipeline.

Q: What is the current state of the proposed Kazakhstan-China pipeline? (A 690-mile section from Atasu in central Kazakhstan to the Chinese border town of Alashankou has been proposed as the first stage in a projected 1,864-mile pipeline to transport Caspian Sea oil to Chinese markets, but. the multi-billion dollar project has yet to line up international funding.)

A: We are very interested in this pipeline.

Q: What security measures are being undertaken to secure Kazakh oil facilities from terrorism?

A: We are using the very best experience in the world in this situation and working very closely with American specialists.

Q: Are there any plans to ship Kazakh oil via Iran? (While Kazakhstan and Iran have had tentative discussions of oil swaps and Caspian-Persian gulf pipelines for years, such plans are strongly opposed by both Russia and the U.S.)

A: We are looking at and studying this option.