Kazakhstan: Rising output and a change of leadership
Published date | 01 May 2019 |
Date | 01 May 2019 |
DOI | http://doi.org/10.1111/oet.12681 |
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Kazakhstan: Rising output and a change of leadership
Nursultan Nazarbayev resigned from his position as
Kazakhstan’s President in March, after nearly 30 years in
the job. However, little change in oil and gas policy is
expected, with power passed on within the ruling party and
Nazarbayev maintaining a significant influence on decision-
making. The country’s oil production is now on the rise fol-
lowing the resolution of major problems associated with the
development of its largest field, Kashagan—albeit at higher-
than-expected cost and with continuing heavy dependence
on western majors’technical expertise. Ties to Russia are
also likely to remain close, while Chinese investment is on
the rise, which together makes it likely Kazakhstan will stay
outside OPEC.
Kazakhstan is a major oil producer with output of just
under 1.9 mn bd curren tly (up from 1.65 mn bd in 2016—
see Figure 1), most of which is exported. It has estimated
proven crude oil reserves of 30 bn bbl as of January 2018,
the 12th largest in the world, according to the US Energy
Information Administration (EIA). The central Asian coun-
try is an ex-Soviet Republic, having only been independent
since 1991 (Nazarbayev ran the country since before
independence).
About half Kazakhstan’s recoverable oil reserves are
located in five major onshore fields—Tengiz, Karachaganak,
Aktobe, Mangistau, and Uzen—with the bulk of the remain-
der at the offshore Kashagan and Kurmangazy fields, in
Kazakhstan’s sector of the Caspian Sea. Kashagan is the
largest oil field outside the Middle East and the fifth largest
in the world in terms of reserves, with Tengiz and
Karachaganak not far behind.
Unlike in many OPEC members, the oil is not easy or
cheap to produce, so Kazakhstan is heavily reliant on over-
seas expertise and capital. Its openness to this investment,
along with its substantial conventional onshore resources
(much of which is likely still to be found) makes Kazakhstan
a key destination for western majors, including Chevron,
Exxon, Shell, Total, and Eni. In 2018, Shell upstream direc-
tor Andy Brown told Platts that Kazakhstan was the oil
major’s“No.1 conventional oil and gas country”on the
strength of its stakes in Kashagan, and Karachaganak (which
Shell acquired
1
as part of its takeover of BG in 2016).
Russian companies, such as Lukoil and Transneft, are
also heavily involved in Kazakhstan’s upstream and trans-
portation infrastructure—most of which passes into Russia
from the land-locked country. And more recently, China’s
CNPC and Sinopec have also made significant investments.
State-owned KazMunayGas Group (KMG) is the national
operator, covering all areas from distribution to exploration.
1|BIG THREE GAIN MOMENTUM
The vast majority of the country’s production comes from
three giant fields: Tengiz, Karachaganak, and Kashagan;
although their complex, acidic and high-pressure nature
makes production a challenge.
Until 2017, output was dominated by the Tengiz and
Karachaganak fields. The largest source, Tengiz, produced
648 000 bd in the first half of 2018, with produc tion set to
reach around 900 000 bd from 2022 following expansion
work. Karachaganak produced 247 000 bd of liquids in
2017, according to Italy’s Eni.
These two were joined by the giant Kashagan field
2
in
2017 after a false start in 2013 and several years of delays
that ended up pushing development costs above $50 billion.
Output moved above 300 000 bd in 2018. Kashagan has
proved to be one of the most challenging oil projects in the
world, with its main reservoir more than 13 000 ft below the
Caspian seabed under very high pressure and temperature,
along with high levels of corrosive hydrogen sulfide. In
addition, conventional drilling and production technologies
such as fixed or floating platforms cannot be used because
of shallow water and winter ice. Instead, offshore facilities
have been installed on artificial islands.
Karachaganak is a gas condensate field with reserves of
around 9 bn bbl of oil and gas condensate and 47 tcf of gas
and is operated under a 40-year Production Sharing Agree-
ment. Located in the northwest near the Russian border,
partners include Eni, Shell, (joint-operators with 29.5%
shares each), Lukoil, Chevron, and KMG. Overall, it is
planned to recover about 300 million tons (2.4 bn bbl) of liq-
uid hydrocarbons and 800 bcm (28 tcf) of gas during the
contract period.
DOI: 10.1111/oet.12681
Oil and Energy Trends. 2019;44:3–19. wileyonlinelibrary.com/journal/oet © 2019 John Wiley & Sons Ltd 3
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