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Ardak Issaev MSc
KBTU
Oil and Gas Sector of Kazakhstan
According to the country report of the
International Monetary Fund (IMF) published in 2004, most of the Caspian
region’s fields with the largest recoverable reserves belong to the Republic of
Kazakhstan. The proven and probable crude oil and gas reserves are 50-60
billion barrels and 6 trillion cubic feet, respectively; and with a current
production rate of 1.5 billion barrel per day the hydrocarbon resources will be
sufficient for the country for the next 70 years.
In addition, as per the IMF report (2004), within
next following 15 years Kazakhstan would be in the top ten oil-exporters with
the production rate of 3.5 billion barrels per day, at the same level as
Venezuela, Iran, Norway and Mexico (see Figure 1). Gas production would also
rise rapidly to 4 times more by 2010 than it was in 2004 and it was planned
that by 2020 the production rate would reach 40-60 billion cubic meters per
year. Annual income would be $12 billion per year, but with a delay for several
years because of the difficulties in the development of offshore fields. It was
predicted that a peak of crude oil production would be reached in 2014 before
falling to 2.3 million bpd in 2018.
Figure 1 –
Petroleum production outlook
Source:
International Monetary Fund, 2004
The country's major hydrocarbon reserves are found in the western region of
the country, territory of which includes Atyrau, Mangystau, and West
Kazakhstan, as well as Aktobe oblasts (Egorov et al., 2003). In the accounts of onshore fields in these
oblasts there is about half of current proven reserves, whereas the offshore
Kashagan and Kurmangazy oil fields, located in the Kazakhstani part of Caspian
Sea, are believed to contain at least 14 billion barrels (US Energy Information
Administration, 2010).
In the Figure 2 it can be seen that in 2009 oil
production in Kazakhstan was more than doubled the rate of a decade earlier,
and reached 1.54 million barrels per day, while domestic oil consumption
averaged 241 000 bbl/d during this period of time; which means that remained
volume of oil in rate of 1.3 million barrels per day were exported to the
international market. Nowadays, Kazakhstan is one of key players in petroleum exporting
sector in Central Asia with present petroleum transportation system delivering
the crude oil to world markets by pipelines to the Black Sea via Russia through
the Caspian Pipeline Consortium (CPC) oil pipeline and Atyrau-Samara Pipeline;
by barge and pipeline to the Mediterranean via Azerbaijan and Turkey through
Baku-Tbilisi-Ceyhan; by barge and rail to Batumi, Georgia on the Black Sea
(Trans Caspian Transportation System); and by pipeline to China through the
Kazakhstan-China oil pipeline (www.kmgep.com;
www.mgm.gov.kz).
Figure 2 – Oil
production and consumption in Kazakhstan, 1992-2009
Source: US Energy
Information Administration, 2010
As per of interview with Kazakhstan Prime Minister
Karim Massimov (October, 2010), the Kazakhstani government is going to
strengthen its position in the world oil trading market; and by the Government
it is anticipated to increase crude oil exporting up to 3 million barrels per
day by 2020; however, it should be taken into account that the rapid oil
production boost will require extra capacity for exporting infrastructure
system.
In 2010 it is planned to increase the oil
production rate up to 1.6 million barrels per day. Successful realization of
the plan is dependent on performance of the largest key oil producing fields of
the country. These fields are Tengiz, Karachaganak, Uzen, Mangistau, Aktobe,
the North and South Kumkol, as well as Akshabulak fields. All od these eight largest
are currently producing onshore fields, and five of them are located in the
western part of the country; the North and South Kumkol fields are situated in
the south central area, and the Akshabulak field is in the central area of the
state. In the balance of these major fields are accounted about 80% of liquids
production in the country as of 2008 (US Energy Information Administration,
2010).
Figure 3 –
Kazakhstan Oil Pipelines
Source: CIA World
Factbook, 2010
Particularly interesting project, that has a
potential to be one of the drivers of Kazakhstani Petroleum Industry in the
future, is development of offshore field – Kashagan, which is currently under
development phase. The offshore oil field is believed to be as the largest one
known outside of the Middle East and the fifth largest in the world in terms of
hydrocarbon reserves. Its location is the northern shore of the Caspian Sea
near Atyrau city. Initially, Agip Kazakhstan North Caspian Operating Company
(Agip KCO) was appointed to develop the field; however, then, in 2009, Agip KCO
was replaced by the North Caspian Operating Company (NCOC), which operational
activity includes Kashagan and other fields in the neighbouring area such as
Aktote, Kairan, and Kalamkas. The NCOC Production Sharing Agreement consists of
Total, Eni, ExxonMobil, Shell, and National Company KazMunayGas with a share of
16.8% each, ConocoPhillips – 8.4%, as well as Inpex – 7.6% (Egorov et al.,
2003; US Energy
Information Administration, 2010). The estimated field's recoverable reserves
are about 11 billion barrels of oil. Originally, it was planned to get first
oil stream in 2005, however the timetable for production start-up has then been
postponed to 2013 due to cost overruns, associated with the field's adverse
operating environment and complex geological problems. Initial production rate from
phase 1 of the project is expected at 370 000-450 000 barrels per day, with a
peak production of 1.5 million barrels per day by 2019 during phase 2 as per US
Energy Information Administration report of 2010.
In terms of Downstream/Refining Sector of
Kazakhstani Petroleum Industry, the country had a crude oil distillation
capacity of 345 100 barrels per day as of January 1, 2010 in accordance with the
Oil and Gas Journal. There are three major oil refineries located in Pavlodar,
Atyrau and Shymkent. As per Nefte Compass report an average of 232 900 bbl/d were
processed between January and September 2009 against average local consumption of
240,000 bbl/d in 2009.
Although Kazakhstan is a significant oil exporter, the
country experiences regional and seasonal oil product shortages because of
production of oil and gas resources mostly in western part of the country; and its
industrialized northern and southern regions is lacking pipeline connections with
the western petroleum rich regions. These oblasts rely on imports from neighbouring
countries such as Russia and Uzbekistan, respectively. What is more, until
recently there have not been the high levels of foreign direct investment in
the refining sector that other sectors of the oil industry have. One more
factor, which has a huge impact on petroleum products import into the country,
is low domestic prices for refined products. This factor forces oil producers
to export crude oil to international markets instead of refining it locally. As
per report of National Company KazMunaiGas, the company plans to invest up to
US $4 billion to modernize mentioned three refineries; and it expects to fully
meet domestic demand for petroleum products from its refineries by 2014 from
its own increased production of oil and condensates.
As far as natural gas production is concerned, this
sector is relied on production of associated natural gas from oil fields, and
the country currently is approaching to become a net gas exporter. Likewise oil
fields, most of natural gas resources of Kazakhstan are situated in the western
part of the country, with more than half of its all gas reserves is in the balance
of Karachaganak oil and gas field.
As can be found in Figure 4, annual production of natural
gas has been growing from 162 Bcf in 1999 to 387 Bcf in 2009. By 2009 accumulated
total gross gas production was 1.26 trillion cubic feet, and 69% of the gas
(870 Bcf) was produced, as well as remained volume (31% or 390 Bcf) was re-injected
back into oil-bearing reservoirs to enhance crude production. The two largest
natural gas producing fields – Karachaganak and Tengiz – are also the giant crude
producing fields (US Energy Information Administration, 2010).
Figure 4 – Gas
production and consumption in Kazakhstan, 1992-2009
Source: US Energy
Information Administration, 2010
There are two separate domestic natural gas distribution
networks in the country: the west one services the country's producing fields,
and the second – south one – delivers imported natural gas to the consuming
regions. The shortage of internal domestic pipelines, which may connect the
country’s natural gas-producing regions with the country’s industrial areas
and/or back lands, counteracts to the overall development of the country's
natural gas producing and distributing sectors. Southern regions of Kazakhstan are
supplied with gas from Uzbekistan delivered through the
Tashkent-Shymkent-Bishkek-Almaty pipeline, despite the country exports gas from
its North-Western part. Mainly, the gas transportation system is controlled
and managed ba KazTransGas JSC which
is a subsidiary of National Company KazMunaiGas.
Until recently Kazakhstan was mainly as a transit country
for natural gas pipeline exports from Uzbekistan and Turkmenistan to Russia and
China through Central Asia Center Pipeline (CAC), Central Asia Gas Pipeline
(CAGP), Bukhara-Uralsk Pipeline and Tashkent-Shymkent-Bishkek-Almaty Pipeline
(see Figure 5). However, in 2009, for the first time in the history of the
country gas exports exceeded imports by 134 billion cubic feet, and Kazakstan
has become a net oil exporter (US Energy Information Administration, 2010; www.kmgep.com; www.mgm.gov.kz).
Figure 5 –
Kazakhstan Gas Pipelines
Source: Kazakhstan Oil
and Gas Ministry
All in all it can be concluded that Kazakhstan
belongs to a number of countries, which have the great potential of development
due to its huge explored hydrocarbon resources. As per the explored oil
reserves the country holds the 13th place among world petroleum
producing states, as well as in terms of gas and condensate resources it is in
the 15th position. At present and future projected time, the major
sources of increasing petroleum production rates will remain already explored
oil and gas reserves of West Kazakhstan, as well as the production rate growth
from the offshore fields will allow the petroleum sector of the country to have
dominating position in the national economy within next 10-15 years.
References
Central Intelligence Agency (2011) The
World Factbook: Kazakhstan. www.cia.gov.
[15/10/2011]
Egorov O., Chigarkina O., Baimukanov A. (2003) Oil & Gas Industry of Kazakhstan: Problems of Development and
Effective Functioning. Almaty, Kazakhstan.
Energy Information Administration of the US Department of Energy (2008) Country Analysis Briefs: Kazakhstan. www.eia.doe.gov [accessed on 15/10/2011]
Energy Information Administration of the US Department of Energy (2010) Country Analysis Briefs: Kazakhstan. www.eia.doe.gov [accessed on 16/10/2011]
International Monetary Fund Report (2004) Republic of Kazakhstan. International Monetary Fund: Washington
D.C.
KazMunaiGas Exploration and Production (2011) Kazakhstan Oil and Gas Sector. www.kmgep.kz.
[accessed on 17/10/2011]
Ministry of Oil and Gas of the Republic of Kazakhstan (2011) The Oil Industry. www.mgm.gov.kz
[accessed on 16/10/2011].
Ministry of Oil and Gas of the Republic of Kazakhstan (2011) The Gas Industry. www.mgm.gov.kz
[accessed on 16/10/2011].
The Economist Intelligence
Unit (March, 2009) The country report: Kazakhstan. The Economist Intelligence Unit: London, United
Kingdom.