Biohim produces ethanol from wheat and has a capacity of 60,000 tons/year

nWhy should an oil-rich country be in the business of renewable energy? The question, although a valid one, requires contextual framing. Poised to become a major hydrocarbon player, Kazakhstan produced 1.29 million barrels per day (mbd) of oil in 2005, mostly at giant fields such as Kashagan and Tengiz. Its Caspian Sea basin holds proven natural gas reserves of up to 100 trillion cubic feet (Tcf), according to a high estimate. But on a political level, President Nazarbayev is fully conscious of cyclical oil prices and of the threat of Dutch disease. The answer is Basco, an industrial holding that produces everything from bio-ethanol to advanced photovoltaic panels.

“We’re trying to reconcile natural opposites,” says Alexander Sutyaginsky, Basco’s CEO and a qualified geologist. Together with Germany’s Thyssen-Krupp, Basco is building a new metallurgical plant that will reprocess silicone into polysilicone, a source of components for solar energy units. The holding has invested in an eclectic mix of petrochemicals, bio-fuel additives, poultry farms and meat-packing facilities. Overall, the theme is alternative energy.

The Basco holding is a leader in petrochemicals, bio-fuel research, fertilizers and metals. It is also a textbook example of local partnerships. “We are an example of how to segment business and come up with alternative energy sources. For the first time, we’re bringing together distictly polar sectors like agriculture and metallurgy,”

ALEXANDER SUTYAGINSKY CEO, Basco

Established in 1992, Basco got its initial revving from the fuel and lubricants sector. Its petroleum storage containers in Zhezkazgan and Almaty have a cumulative capacity of 19,640 cubic meters. In the rest of the country, capacity for light and heavy oil storage stands at 61,200 cubic meters. The holding benefits from the prime location of these storage facilities. But it is the high-tech poultry farms that are rapidly upstaging other strategic business units. With equipment by Big Dutchman, Basco is producing 500 tons of poultry meat and 126 million eggs per year. Turnover is forecast to reach $31.7 million in 2007. A new high-tech chicken plant will come online shortly, with capacity for 840,000 animals. This year, the company will also set aside 200,000 hectares of agricultural land to design a progressive scheme of crop rotation. With world prices for corn, cereal, sugarcane and soybean skyrocketing, Kazakhstan’s agribusiness is about to get another lease of life. Mr Sutyaginsky confesses to a new business line: pig-rearing. After all, 40 per cent of the Kazakh population still lives in rural districts. Partnering with local farmers will keep agriculture viable.

“If we export grain, we get a return of $330-340 per ton. The price per ton of grain is $120, which is a stunning price considering the transportation costs. But if we export grain for ethanol, the return is $650 per ton. What is the better deal?” asks Mr Sutyaginsky. The argument for reprocessing grain for use as a bio-fuel additive has never been more patent. Always conscious of the country’s grain security to avoid price distortions, ethanol can then be converted into ethylene oxide, which fetches $1,100 on the international market. Mr Sutyaginsky thinks alternative energy trends will lead to more R&D into the discovery of bio-plastics. “In Kazakhstan, we meet all the preconditions to develop this industry.”

At the opening of a Biochem plant recently, President Nazarbayev was at hand to inspect the new facility. German engineers were present. Their know-how often helps buy credibility in regional CIS markets, including Russia. “The president puts a lot of stress on breakthrough projects which are being implemented across Kazakhstan. His administration provides extensive support in terms of fiscal incentives and tax preferences, as well as personal oversight,” says Mr Sutyaginsky. As the cereal basket of Central Asia, Kazakhstan’s potential in grain-based ethanol production is quickly gaining a second life. The result is investor interest as far as the UK and Bahrain.