General Information:The Republic of Kazakhstan is about four times larger in area than Texas. It has a population of 16.8 million.
It is bordered by Russia to the north, China to the east, Turkmenistan, Uzbekistan, and Kyrgyzstan to the south, and the Caspian Sea to the west. Kazakhstan's currency, the tenge, has an exchange rate of about 142.6 tenge per U.S. dollar as of November 2000.
The gross domestic product (GDP) of Kazakhstan in 1999 was estimated to be $54.5 billion (purchasing power parity).
Kazakhstan Energy Policy:
Kazakhstan is trying to transition toward a free market in energy and encourage foreign investment to exploit its oil and gas resources.
The Ministry of Energy, Industry and Trade is the main government entity responsible for implementing this policy.
Kazakhstan is shifting its trade and energy patterns away from the former Soviet Union and toward its neighbors in Central Asia, the Caucasus, and Turkey.
The TRACECA Program (Transport System Europe-Caucasus-Asia) is developing an East-West corridor from Central Asia, through the Caucasus, across the Black Sea to Europe. This program, which was set up at a European Union Conference in 1993, is often called "the Great Silk Road."
In 1997, the government of Kazakhstan issued a decree on privatization and restructuring in the energy sector. Through this decree, all companies in the energy sector have gone through an incorporation process and are legally prepared for future privatization and restructuring.
Kazakhstan is in the process of privatizing its electric system. All the major power plants, comprising 85 percent of generating capacity, have been privatized.
The regional distribution companies are now slated for privatization, with foreign investment encouraged.
The government still sets electrical tariffs on a quarterly basis, but this control may be relaxed as competition develops.
Energy Summary:
Kazakhstan produces approximately 400,000 barrels (bbl) of oil per day; half is refined in the country and half is exported. Kazakhstan produces 150 billion cubic feet of natural gas per year and imports 445 billion cubic feet.
Kazakhstan has 19 gigawatts (GWe) of generating capacity, about 90 percent of which is thermal. There are small amounts of hydroelectric and nuclear capacity.
An historical summary of Kazakhstan's Total Primary Energy Supply (TPES) is shown in Table 1.
Table 1: Kazakhstan's TPES, 1992-96
1992 1993 1994 1995 1996
TPES (Quads) 3.16 2.57 2.38 2.14 1.72
TPES (Mtoe) 79.67 64.73 59.98 53.83 43.38
TPES (toe) per capita 4.69 3.82 3.57 3.24 2.63
* (M)toe - (million) tonnes oil equivalent; 1 Quad = 25.198 Mtoe (by IEA definition)
Source: International Energy Agency (IEA)
Oil:
Kazakhstan is the second largest oil producer after Russia among the former Soviet republics. The state-owned oil company is Kazakoil, and the pipeline company is Kaztransoil.
Of the 400,000 barrels per day (bbl/d) of crude oil that Kazakhstan produces, about half comes from three large fields, Tengiz, Uzen, and Karachaganak. The refineries of Kazakhstan produces 76,000 bbl/d of distillate and 73,000 bbl/d of residual oil.
The proven reserves in the Tengiz oil field are estimated to contain between 6 and 9 billion bbl. The Kazakhstan government has estimated there may be 30 billion bbl under the Kazakh region of the Caspian seabed.
Kazakhstan has opened its resources to development by foreign countries and is participating in pipeline projects to move oil to various countries.
Kazakhstan is also trying to find uses for associated natural gas which is being flared, such as building gas-fired power plants.
In 1993, Chevron formed the $20 billion Tengizchevroil joint venture to develop the Tengiz oil field.
Tengizchevroil produced 190,000 bbl/d in 1999, of which 170,000 bbl went through the Russian pipeline system. Some oil went by barge and rail to the Baltic Sea; most of the remainder went by ship, pipeline, and rail to the Black Sea.
Significant expansion of Tengizchevroil's output is expected, and its production could increase to 340,000 bbl/d by 2002.
It is estimated that with sufficient export outlets, Tengizchevroil could reach a peak production of 750,000 bbl/d by 2010.
Tengizchevroil is considering using the Tengiz-Aktau pipeline, whose $100 million upgrade would increase its capacity to 160,000 bbl/d from the current level of 60,000 bbl/d.
The consortium developing northwestern Kazahstan's oil includes Chevron and Mobil. In 1997, Kazakhstan signed a production sharing agreement with a consortium of Texaco, British Gas, and Agip to develop the giant oil and gas field in Karachaganak. They also signed an agreement with another consortium (Mobil, Shell, British Petroleum/Statoil, British Gas, Agip, and Total) to develop offshore oil under the Caspian Sea.
Drilling has started on the offshore Kashagan block in the Caspian Sea, which is being developed by the offshore Kazakhstan International Operating Company (OKIOC).
This project has possible oil reserves which have been estimated at up to 40 billion bbl. Development of offshore oil under the Caspian Sea has been slow because of a lack of agreement among the surrounding nations.
In 1997, Kazakhstan and Turkmenistan signed a communiqué to divide their sections of the Caspian Sea along median lines.
Then in 1998, Kazakhstan signed a bilateral agreement with Russia (not yet ratified) dividing their part of the northern Caspian seabed along median lines.
A historical summary of petroleum production and consumption in Kazakhstan is shown in Table 2.
Table 2: Petroleum Production and Consumption in Kazakhstan, 1992-98
(in thousand b/d)
1992 1993 1994 1995 1996 1997 1998
Production (total)* 530 490 415 414 457 521 526
Production (Crude Oil only) 444 408 352 362 403 466 476
Consumption 404 341 304 281 256 210 220
* includes crude oil, natural gas plant liquids, other liquids, and refinery processing gain
Source: DOE/EIA
Natural Gas:
Kazakhstan has 83 trillion cubic feet (Tcf) of natural gas reserves associated with its oil production. However, the pipeline infrastructure for moving the gas is lacking and a lot of gas is being flared. At the present, it is still unclear whether various pipelines or liquefaction facilities will be built.
The main area for associated natural gas is the Karachaganak field in northwest Kazakhstan, which contains more than 40 percent of Kazakhstan's total reserves.
In 1997, an international consortium with firms from the U.S. (Texaco), Italy (Agip), the United Kingdom (BG), and Russia (Lukoil) signed a production sharing agreement to develop the field for 40 years and invest $4 billion by 2006.
However, development of the field has been delayed because Russia had wanted all the gas to be processed at their nearby Orenburg facility and exported via pipelines from Russia.
Instead, the consortium is now building a $300 million gas processing plant at Karachaganak. The plant should produce 883 billion cubic feet (bcf) annually as well as 300,000 bbl/day of liquids.
There are also gas-producing areas in the Tengiz, Zhanazhol, and Uritau fields. The associated gas field at Tengiz produced over 50 bcf in 1997, and will become the second largest producer of natural gas in Kazakhstan.
There are also undeveloped offshore gas areas in the Caspian Sea near Russia that are not currently linked to pipelines.
It is not clear whether Kazakhstan will ultimately reach a deal with Gazprom to use their pipelines or find another way to move the gas.
Kazakhoil and Phillips have agreed to conduct a feasibility study on constructing a $500 million gas liquefaction plant at Atyrau by 2004. The plan is to move the liquefied gas by rail.
Various natural gas pipelines have been proposed. A 5,000-mile China Pipeline option is being studied for bringing 1 Tcf of gas from Central Asia to China via Kazakhstan.
Another alternative is a pipeline to Turkey, which had a preliminary feasibility study by Exxon, Mitsubishi and others.
There is also a possibility of twin oil and gas pipelines being constructed across the Caspian Sea from Kazakhstan to Baku.
In December 1998, Kazakhstan signed an agreement with Royal Dutch/Shell, Chevron, and Mobil to do a feasibility study of this option.
Kazakhstan has an overall problem of being unable to connect the right places with gas pipelines. Gas producing areas in the west of Kazakhstan are not connected to gas consuming areas in the southeast and the north.
There are two separate gas pipeline networks; Kazakhgaz does distribution in the west and Alaugaz does distribution in the southeast. The gas production in the west is exported to Russia.
Meanwhile, 40 percent of the Kazakh gas consumption comes from imports from Turkmenistan, Uzbekistan, and a small amount from Russia.
In 1998, Uzbekistan cut off the gas supply because of unpaid bills. Meanwhile, Kazakhstan is trying to build internal pipelines connecting the western fields to the rest of the country.
Kazakhstan awarded a 15-year contract to Tractebel of Belgium to manage distribution systems for western Kazakhgaz and southern Alaugaz, starting in July 1997.
After long negotiations of disputes, Tractebel agreed in March 1998 to invest $1.0 to 1.5 billion for construction, repair, and planning costs. This includes a $150 million gas line in southern Kazakhstan to bypass Kyrgyzstan.
Kazakhstan is trying to get more investments for capturing flared gas, locating new gas fields, metering the gas at cross-border locations, and environmental protection activities.
A historical summary of natural gas production and consumption in Kazakhstan is shown in Table 3.
Table 3: Dry Natural Gas Production and Consumption in Kazakhstan, 1992-98
(in Tcf)
1992 1993 1994 1995 1996 1997 1998
Production 0.29 0.24 0.16 0.17 0.15 0.22 0.19
Consumption 0.710 0.523 0.530 0.397 0.510 0.494 0.473
Source: DOE/EIA
Source: United States Information Administration
© 2001 Mena Report (www.menareport.com)
