The Borat Trade: Four Kazakhstan Plays Are Very Nice

Editor's note: This column was submitted by Stockpickr member Winston Kotzan.

Kazakhstan has been making the news lately, and this time it's not just because of Borat.

A recent article in Barron's on emerging markets cited this rising star in central Asia as a prospective addition to Progressive Asset Management's Advance Frontier Markets Fund, a fund of funds that makes pioneer-type investments in hinterland nations.

Much like neighboring China, Kazakhstan sustains a 9%-plus GDP growth. But unlike resource-hungry China, Kazakhstan is a supplier of raw materials. Its vast reserves of oil, natural gas and uranium near the Caspian Sea are the reason for a flood of foreign investment.

There are several Western companies pioneering this emerging land. Investing in their stocks offers what I like to call a "Borat" trade.

Early in the next decade, Kazakhstan is expected to become the world's fifth-largest exporter of oil. It currently ships 1.3 million barrels of oil daily, and that number is expected to increase tenfold over the next 10 years. Chevron(CVX Quote) is the early bird to this bull market.

As the first Western oil company to arrive in Kazakhstan, Chevron has become the nation's largest private oil producer. About 20% of its net proven oil and natural gas reserves are in Kazakhstan.

According to its 2006 annual report, about 10% of its daily oil production came through its TengizChevrOil subsidiary in Kazakhstan. The subsidiary is a joint venture between Chevron, Exxon Mobil(XOM Quote) and Kazakhstan's state-owned oil company. Currently, its oil fields are under expansion plans, expected to increase capacity between 53% and 83% by 2008. The Tengiz oil field is one of the world's largest with an estimated 6 billion to 9 billion barrels of recoverable oil.

In addition, Chevron has vertically integrated itself in the oil supply chain, managing pipelines along the Caspian Sea and selling oil-based products within the country's borders.