By Ainura

In May 1997, the governments of Russia, Kazakhstan, and Oman, along with a group of private oil companies signed the Caspian Pipeline Consortium (CPC) agreement. The agreement calls for the construction of a pipeline from the northeast shore of the Caspian to Novorosiisk on the Black Sea, beginning in 1997. When the first phases of the CPC pipeline project will boost its capacity to the 67 million tons/year. The following petroleum companies are signatories to the agreement: Chevron, Mobil, Oryx, Agip, British Gas, Lukoil, Rosneft and Kazakhoil (the Kazakhstan state oil company, established in March 1997).

In December 1993, in order to exploit oil deposits in the Caspian Sea, the Kazakhstan state company KazakhstanCaspishelf (KCS) joined with six Western petroleum companies to form the Caspian Sea Consortium.(The six Western partners were, Agip, British Gas, an alliance of British Petroleum/Statoil, Mobil, Shell, and Total.) The Consortium completed its task of seismic exploration of the northeast Caspian Sea off Kazakhstan ahead of schedule under budget in August 1996. The Consortium members were continuing negotiations on a production sharing agreement (PSA) with the Kazakhstan government. Once a PSA is singed (which could occur as early as July 1997), a new consortium will be organized to begin exploratory drilling in the Caspian - perhaps as soon as the latter half of 1997.

As the government of Kazakhstan moves forward on developing offshore areas, it is participating in ongoing negotiations with Russia, Azerbaijan, Turkmenistan and Iran to establish a legal regime for the Caspian Sea.

Kazakhstan has moved rapidly to privatize its oil and gas sector since mid-1996. Controlling shares of most of its large state oil companies have been sold to outsiders, including to a Canadian company, an Indonesian firm, and the Chinese National Oil Company (CNOC). As part of its bid, CNOC is promising to build a pipeline across Kazakhstan to China. Negotiations are underway for the privatization of Kazakhstan's gas pipelines, and the government is holding discussions with foreign oil companies over the future privatization of its oil pipelines.

Kazakhstan has three oil refineries: at Shymkent, Pavlodar, and Atyrau (on the Caspian Sea). In August 1996, Vitol, a Swiss oil trading company, purchased the Shymkent oil refinery. In March 1997, CCL Oil, a U.S. oil company, leased the Pavlodar refinery. The Atyrau refinery, still state-owned, was transferred to Kazakhoil, the Kazakhstan state oil company, in 1997.

On March 4, 1997 Kazakhstan President Nazarbaev anounced the establishment of the state oil company, Kazkhoil. Former Minister of Oil and Gas, Nurlan Balgimbaev, was abolished, with some of its functions given the bulk of the state's assets in the oil and gas sector- with the important exeption of domestic oil and gas pipelines - including all of the state shares in the Tengiz and Uzen oil fields, state shares in the Karachaganak gas field, and a portion of the goverment shares in Embamunaigas. The former joint stock company Kazakhstancaspishelf (KCS) has been made a part of Kazakhoil, Baltabek Kuandykov, made a senior Kazakhoil official. Kazakhoil also manages Kazakhstan's share of the Caspian Pipeline Consortium.

Kazakhoil is clearly the dominant Kazakhstan entity in the country's oil and gas sector, and will play the leading role in future Kazakhstan contracts with foreing oil companies. Kazakhoil will be largely responsible for arranging the tenders of oil and gas properties still to be privatized, although actual licenses for projects will conduct exploration and production activity. Kaztransoil, a state company created in May 1997, manages all of Kazakhstan's domestic oil pipelines.

Two other state companies Alaugas and Kazakhgas run the domestic gas pipeline network. In the summer of 1997, the Kazakhstan government was seeking to involve foreign oil and gas companies in the managment of its oil and gas pipeline systems.

In June 1997, Kazakhstan awarded Tractebel (Belgium) a 15-year contract to manage its natural gas network. Tractebel has pledged to spend $600 million on investment, repair, construction, and planning costs, as well as $100 million to build a gas line in southern Kazakhstan to bypass Kyrgystan. Other investment needs include capturing previously flared gas, developing projects that support swap agreements with neighboring states, appraisal work for gas fields located near consuming areas, meter installation at cross-border locations, and environmental rehabilitation and protection.

1. Would you characterize a Kazakhoil as a monopolist?

2. In a monopoly

a) sellers and buyers are price-takers;

b) entry is not limited;

c) the seller's behavorior is not strategic.

d) standard product is manufactured.

3. Entry barries into the indastrial sector (monopoly) could be:

a) patners and licenses

b) lower costs for major producers

c) exclusive uights official certification

d) every thing said above is correct

4. In the long run equilibrium in monopoly means that the goods, are sold at the prices:

a) equal to marginal costs;

b) equal to marginal profit;

c) excud marginal costs;

d) equal to average costs;

5. For Kazakhoil the following is correct:

a) profit maximization leads to maximization of the surplus

b) Profit reaches its maximum when the price equals marginal costs

c) Marginal profit is higher than the price in the point of maximas profit

d) Profit is at its maximum when marginal costs are equal to marginal profit

1. For each situation find respectively correct type of market structure

1) pure competition

2) pure monopoly

3) monopolistic competition

4) oligopoly

a) There are many suppliers in the market and each of them ofers interprices shoes comperitevly same prices.

b) On the market there is a single supplier of the telecomunication service.

c) Wide range of farmers offers patotoes at equal prices.

d) Some of the big firm working on the auto-tyre market.

2. The matrices of results for possible strategy 2 firms presented bellow:

Strategy of the firm A

1 4000 3000

Every firm have 2 possible strategy.

Question:

a) What dominant strategy for firm A?

b) What dominant strategy for the firm B?

c) What decision in this situation will be equilibrium?

d) What loss will be for the firm A in the equilibrium decision?

e) What profit will be for the firm B in the equilibrium decision?

3. Pure competition market with equilibrium volume of the output 100000 car in the year 2 firm capture all market. What will be the amount of the output of each of them. If they derize zero profit. The companyes have equal average and marginal costs at any amount of production.

a) 25 and 50

b) 50 and 50

c) 25 and 75

d) 75 and 25

True or Falls

1. The firms on the pure competition market offers more

differentiated goods than at the monopolistic competition.

2. If on the oligopolistic market the firm encrease or decrease the price or the output this will affect the sales and profit of the company.

3. On the oligopolistic market the price less stability, than on the pure competition.

4. In a monopolistic competition market industry sector output is provided by a large number of companies.

5. In a monopolistic competition is not possible to reach effective allocation resources.

6. In oligopoly usually goes along with price and nonprime competition.

7. In a monopolistic competition market and oligopoly industry sector volume of the output lower and price is higher than in a pure competition.

8. In a monopolistic competition the firm always get positive economical profit.

1.

a) 3)

b) 2)

c) 1)

d) 4)

2.

a) strategy 2

b) strategy 1

c) the firm A strategy 2

the firm B strategy 1

d) $3000

e) $3000

3. b)

True/Falls

1.F

2.T

3.F

4.T

5.T

6.F

7.T

8.F

* Economics - eleventh edition, McConnell

* Chemberlin E. The theory of monopolistic competition

* Oil watch. June 16 - june 3'98.