Hurricane's Kazakh subsidiary says oil output is rising

Thomas Marlo, the president of Hurricane Kumkol Munai, has said that his company had managed to increase output considerably in recent months.
The Kazakh subsidiary of Canada's Hurricane Hydrocarbons is currently producing 12,000 metric tons of oil per day, Marlo said, up from only 5,000 metric tons per day in February.
He noted that Hurricane Kumkol Munai had produced a total of 2.9 million metric tons of oil last year (about 7,945 metric tons per day), including production from its joint venture with Russia's LUKoil. Output is expected to rise to 3.2 million metric tons in 1999 (or about 8,767 metric tons per day), he added.
Marlo went on to say that Hurricane Kumkol Munai would increase exports this year. The company wants to send up to 50,000 metric tons of oil per month to China in the second half of this year, he said. The oil will be shipped by rail, he said. Hurricane Kumkol Munai currently refines and sells 95% of its output within Kazakhstan, and the remaining 5% is shipped to Europe as crude.
Moreover, Marlo added, the company has paid off all wage and tax arrears.
Hurricane Kumkol Munai's progress is remarkable given that the company has endured a rocky year. Last year's quarrels with the Chimkent refinery, which until recently was the only facility to refine Kumkol oil, led the company's parent, Hurricane Hydrocarbons, to file for protection from creditors earlier this year. Hurricane has made arrangements to merge with the Chimkent oil-processing plant in order to stave off bankruptcy, but analysts have expressed scepticism that the merger will save the company.
Marlo, for his part, said that Hurricane Kumkol Munai's situation had improved after the parent company reached agreement with the refinery. He added, however, that it would take time to complete the merger.
He also stated that Hurricane Kumkol Munai would have to implement a cost-cutting program despite improved performance and improved relations with the Chimkent plant. The company plans to dismiss 2,000 of its 5,000 workers at the Kumkol field, he said. The lay-offs will allow Hurricane Kumkol Munai to cut its production costs to $ 23 per metric ton, he noted.
Marlo was speaking shortly after Hurricane Hydrocarbons issued a press release on the refinery processing fees set by the Kazakh government. Hurricane noted that Astana had set processing fees at the Pavlodar oil refinery at 1,680 tenge ($ 12.92) per metric ton of crude, excluding value-added tax (VAT); at the Atyrau oil refinery, 1,800 tenge ($ 13.85) per metric ton; and at the Chimkent oil refinery, 1,700 tenge ($ 13.08) per metric ton. If VAT is included, the rate for processing oil at the Chimkent plant comes to $ 15.70 per metric ton. Under the agreement signed by Hurricane Kumkol Munai and the Chimkent refinery on April 23, 1999, the processing fee comes to $ 20 per metric ton, including VAT.
Hurricane said that it would review the possible impact of the new fee schedule on its operations but did not comment further. Hurricane has been working in Kazakhstan since late 1996, when it was declared the winner of a privatisation tender for a majority stake in Yuzhneftegaz, the regional oil producer that had been operating the Kumkol field. That field is believed to contain about 429 million barrels of crude oil. Since Kumkol is Hurricane's only producing asset, last year's dispute with the Chimkent refinery has had a strong negative effect on the company's profits and stock prices.