OREANDA-NEWS. September 04, 2008.
Ladies and gentlemen! Dear Guests!
It is a privilege for me to once again welcome you to the Eurasian Energy Forum. This is the third time we are gathered at this event, which focuses on the importance of efficiency, stability and security inherent in Eurasian energy development.
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The current state of the global economy underlines the importance of energy and energy resources in continuously improving the levels of prosperity and the standards of living, as well as expanding opportunities for citizens of both developed and emerging-market countries to better their life. Taking this effect into account, the key issue the international community is currently facing is to ensure effective, reliable, accessible and environmentally safe energy supply.
 
Kazakhstan is conscious of its growing international significance as a global supplier of oil, gas and petroleum products, and is aware of the resulting international responsibilities. The President of Kazakhstan Nursultan Nazarbayev has reiterated in no uncertain terms that this responsibility is a mainstay of Kazakhstan’s energy policy.

One of the strategic vectors of this policy is ensuring that Kazakhstan continues to strengthen its position as a reliable partner in the international oil and energy markets. This is not just an issue of national interest, but also of diligent implementation of Kazakhstan’s obligations to its partners.

The international energy role of Kazakhstan is also a powerful instrument for ensuring greater openness, transparency, efficiency and competitiveness in the energy markets, and it becomes an ever-increasing imperative on the state to develop solutions to regional and global energy problems. As the Head of the Government, I want to emphasize that our principled stand is to ensure stability of supplies and contracts, provide predictable and consistent basis for international partners operating in our country.

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As you recall, at the previous forum, given the controversial situation around the Kashagan oilfield, I declared that we should respect the interests of both sides – those of Kazakhstan and of the foreign investors.

In the course of the complex talks with all the parties of the consortium, the Government substantially increased the state’s stake in the project to 16.8%; and ensured that the country will receive due compensation for the production delays. By October 25 we will have all the legal formalities on this issue finalized.

Today I want to express my gratitude to our partners for that productive, though complex, dialog. The final outcome is that we succeeded in achieving a formula of cooperation which is satisfactory to all the sides.

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Kazakhstan will always be a reliable and dependable international partner. To further ensure this, we intend to take additional strategic measures.
 
First of all, we will enhance the legislative framework providing for the security and reliability of contractual relations in line with international standards and practices. We will also draft new legislation on subsoil use and state assets; this legislation will more exactly define the regulations on subsoil use and operations and will set out the role of the state.

Supporting the Extractive Industries Transparency Initiative (EITI), we will continue to vigorously pursue a policy of ensuring greater transparency of the financial flows and revenues from extractive industries and energy-related exports. Recently, the Government – upon the respective instruction of the Head of State - has submitted a draft Tax Code for the Parliament’s consideration; this code will be regulating taxation of subsoil users in line with the best international practices.

In order to increase the efficiency of the tax administration and reduce red tape, royalties will be replaced with tax on extraction. Methods of calculating the rent tax and excess profit tax will be streamlined.

It is important to note that the rates of “natural resources taxes” were determined in dialog and cooperation with representatives of the energy industry, taking into account the need for a balanced development of extracting and processing industries as key elements of the national economy.

I can see that many of those assisting the Government to accomplish this task are among those in attendance today. Thank you for participating in these joint efforts.

We intend to expand cooperation with the International Energy Forum (IEF) and will consider strengthening Kazakhstan’s contribution to the Joint Oil Data Initiative (JODI).

We support the principles set forth in the Energy Charter Treaty and the efforts by the member states to enhance international energy cooperation. Kazakhstan will continue to vigorously implement a strategy of diversification of energy export routes. The country will also maintain its existing multi-vector policy with a special emphasis on the safety of these routes. On that basis, specific routes will be selected exclusively on the basis of economic viability and practical considerations.

As before, our country will participate in all major Eurasian energy transportation projects, including CPC, Baku-Tbilisi-Ceyhan, Kazakhstan – China, Burgas-Alexandroupolis and Prikaspiiskyi gas pipeline.
 
We should not lose sight of the fact that the prospects of global economic growth are closely linked to the health of the global energy industry. The growth and security of energy supplies are priorities for all nations.

In that respect, Kazakhstan’s Government will be also taking steps to speed up modernization and consolidation of the domestic oil processing and power generating infrastructure.

As instructed by the President, the Government will introduce measures to boost qualifications in the energy sector and develop vocational training systems on the basis of private-public partnership. These measures will provide the basis for major foreign and domestic investors to participate in such projects. The Ministry of Industry and Trade, Samruk Holding Company and the Ministry of Education and Science are currently working on this.

Today I am offering you – any and all interested organizations – to participate in the Government’s efforts to develop new approaches and strategies for establishing a competitive fuel and power-generation industry in Kazakhstan.

I believe KazEnergy could play a key role in establishing a productive dialog between the state and the energy community.

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Dear guests!
The consensus today is that faster and more decisive development of renewable sources of energy is imperative. As Kazakhstan’s President emphasized when addressing one of the recent sessions of the Foreign Investors’ Council - “the use of renewable sources of energy is an essential precondition of sustainable development of any country in the XXI century”.

In light of the steady increase of consumption of global energy reserves, Kazakhstan wishes to make sure that its historic advantage of having some of the largest in the world natural reserves is not squandered, but rather used sensibly and efficiently.

These reserves should be a catalyst for economic growth and should be used to support economic diversification, ensuring the prosperity of generations to come.

Therefore, the strategy pursued by Kazakhstan’s Government is to improve energy efficiency and environmental safety, and develop practical renewable sources of energy in our country.

We have to develop a comprehensive and encompassing strategy on the issue of energy efficiency and environmental issues such as climate change. I urge the private sector to take active part in these efforts. It is the private sector that is best placed to educate the public in Kazakhstan and the region on the benefits of the new energy policy.

Another direction of developing alternative energy sources whilst combating issues such as global warming and climate change is nuclear power generation. Nuclear energy development should be administered by the Government in cooperation with industry experts, scientists and international partners, with an ever-growing emphasis on the safety of nuclear power stations.

In developing power generation from renewable sources, we should assess the best practices of the EU, the USA and China, and, where necessary, make the respective amendments to the national legislation and develop special programs to jump-start this process.
 
I met recently with World Bank President Robert B. Zoellick, and we discussed the sensitive issue of bio-ethanol production.

Global inflation of staple food prices has been a challenge for all countries. As you know, on September 1 we lifted the ban on global grain exports as our contribution to the efforts taken by the international community to curb the global price hike of cereal products.

I believe the world should undertake concerted efforts to counteract the intensive use of arable land for growing crops for production of bio-ethanol, rather than for production of foodstuffs. Increased bio-fuels production is not the only factor causing global food price rises, but it does play a major role in today’s international food crisis, and is an issue that requires a cautious approach.

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In conclusion, the world today faces new challenges that call for new energy solutions.

I am sure that today’s discussions and deliberations will help us develop new approaches that would be instrumental in fine-tuning our future strategies and actions, developing constructive partnerships in the process.

I wish you every success.