Kazakh oil to flow through Poland?

Ryszard Krauze's Petrolinvest, which belongs to Prokom Software, has bought vast oil fields in Kazakhstan. Krauze acquired a 35-percent share in one and 50-percent stakes in three Kazakh companies that own oil fields with a combined estimated capacity of two billion barrels.

Krauze is one of the richest Poles, with his wealth estimated at zł.4 billion, and he owns biotech company Bioton, developer Polnord and Prokom Software. The Kazakh firms cost Krauze $400 (zł.1,214) million, and he plans to invest another $400 million to extract oil and build oil rigs. The funds for the latter might be raised through Petrolinvest's IPO, which could be conducted within the next nine to 12 months.

This year might see the extraction of the first barrel and the oil will be sold to local distributors. "We have guarantees from three big distribution companies there that they will take oil from us. We want to focus on launching extraction soon, as this will lead to the growth of the value of the whole project," Krauze told the daily Gazeta Wyborcza.

Krzysztof Rozen, the managing partner and head of the Energy and Natural Resources Group at KPMG, stresses that oil from Kazakhstan could be transported in two strategic directions: to Europe and to the East, namely China and India, where the demand for energy is continually on the rise.

Krauze does not exclude that the oil might eventually be sold in Poland. Krzysztof Rozen says that the fact that there is no direct pipeline connecting Poland and Kazakhstan is not important in this respect. "It is crucial that oil be transported to any sale market," says Rozen. He points out that thanks to swap deals, oil could be transported, for instance, to Russia and be collected there by a Russian company, which in turn would deliver oil to Poland via already existing pipelines.

Kazakhstan's oil reserves are estimated at 35 billion barrels and its gas deposits at three trillion cubic meters. "Currently, companies active in Kazakhstan include KazMunaiGaz, ChevronTexaco, ConocoPhillips, ExxonMobil, British Gas, ENI, Total, British Petroleum, CNPC and LukOil," says Altay I. Abibullayev from Kazakstan's Embassy to Poland.

Polish Oil and Gas (PGNiG) and fuel producer and distributor PKN Orlen are also interested in extracting oil in Kazakhstan. Both companies have signed a deal to conduct a mutual project in this respect.

Abibullayev also mentions three other Polish companies operating in the energy sector which are active in Kazakhstan: Oil and Gas Exploration Company Cracow (PNiG Kraków), Drill Lab Kazakhstan and Megagaz. According to Abibullayev, more than 100 Polish firms operate in Kazakhstan, while the value of Polish investment in the years 2001 to 2005 amounted to $10.7 (zł.32.4) million.