Oil and Gas Production Set to Increase

oilIt is estimated that Kazakhstan had produced 82 million tons of “black gold” in 2013.

Experts believe oil production in Kazakhstan is set to increase year on year. Last year, all oil companies in the country, both domestic and foreign, produced 82 million tons of crude oil; in the future, this figure will reach 83 million tons. Growth in the production of the country’s main export staple will be achieved through geological exploration in which oil companies will invest substantial amounts.

According to the plans of the national oil and gas company KazMunayGas (KMG), in the next five years, about 700 billion tenge (US$4.5 billion) will be invested in exploration, almost half of which will be for the development of mineral resources in the Caspian Shelf. This was announced by the managing director of Samruk Kazyna, Malik Salimgereyev at an end of year press conference in Astana.

“The share of the state owned company, KazMunayGas, in the total volume of oil production in Kazakhstan in the past year (82 million tons), will reach 22.6 million tons. This is slightly more than 20%, or one fifth of the total volume. The national company intends to produce the same volume in the next year,” Salimgereyev said.

According to him, over the next nine years, it is planned to nearly double the volume of proven recoverable reserves of oil and gas condensate of KazMunayGas from 789 million tons to 1.4 billion tons. In this regard, projected production figures will increase too. Thus, in 2022, KMG plans to produce more than 35 million tons of oil and gas condensate.

Answering journalists’ questions, the managing director of Samruk Kazyna also gave the forecast for the balance of three major projects in the country: Kashagan, Tengiz and Karachaganak. Production at the Kashagan field in 2022 is expected to reach 14,876 tons; the share of KMG Exploration and Production in this volume will be 2.5 million tons. More than 39 million tons is expected to be produced in the same period at the Tengiz deposit, of which nearly 8 million tons will belong to KMG EP. Karachaganak will produce 7.7 million tons with KMG’s share totalling about 800,000 tons.

“As for the Kashagan deposit, it is too early to speak about any resumption of production. Preliminary reports of diagnostics of the Kashagan pipeline after a leak related shutdown are expected by mid-January 2014. Then we will be able to give more specific information,” Salimgereyev said.

According to the principle of diversification

President Nursultan Nazarbayev has repeatedly said that Kazakhstan, as an oil-producing country, strictly adheres to a policy of diversification of export routes. Judging by the results of this year, the country remains true to this principle. Despite the fact that most Kazakh oil is exported to the world market through Russia and trade has been flourishing with China, the Caucasus corridor remains key.

According to Salimgereyev, last year, more than 61 million tons of Kazakh oil was exported. In 2013, more than 28 million tons of this “black gold” will have been delivered to the world markets through the Caspian Pipeline Consortium, which runs through Russia. Over 15 million tons of domestic oil was transported in 2013 along the second pipeline through Russia, the Atyrau-Samara.

In total, about 11 million tons of crude oil was transported through the Kazakhstan-China pipeline towards China in 2013. Nearly nine million tons will be delivered to the world market through the Caucasian corridor that runs through the Caspian Sea and then through the Trans-Caucasian republics.

“In 2013, the volume of oil transportation by marine routes totalled 8.8 million tons, of which, 1.8 million tons was funnelled towards the direction of the Black Sea, an additional 1.8 million tons to the Mediterranean Sea and 2.9 million tons went from Aktau to Makhachkala (Russia) and 2.3 million tons flowed from Aktau to Baku,” the managing director of Samruk Kazyna said.

The oil is carried by the NMSC Kazmortransflot fleet, which consists of eight tankers, two of which operate in the Black and Mediterranean Seas and six tankers in the Caspian Sea.

As for natural gas, Kazakhstan’s second most important export commodity, 109 billion cubic meters were transported.

“This corresponds to the volume of gas exported in 2012,” added Salimgereyev.

When will gasoline nirvana be reached?

In order to meet the demand for petroleum products, the country modernised three major refineries. Under a plan established by the government, the project should be accomplished in the next 2-3 years. In the meantime, the republic has to import almost 30% of its high-octane gasoline from Russia. According to domestic producers, after modernisation, dependence will disappear.

“The volume of processed oil, including the share of KazMunayGas for 2013, will be 16 million tons (Atyrau Refinery, Pavlodar Petrochemical Plant and Shymkent Refinery and Petromedia in Romania),” said Salimgereyev.

According to him, oil refining in the next year is expected to grow to 17.5 million tons thanks to the December 2013 commissioning of the Aktau bitumen plant.

He added that the experts from KazMunayGas will be engaged next year in the development of a feasibility study for the construction of the fourth refinery in Kazakhstan.

“Accordingly, information about the opening of the refinery and its raw material sources will be made available in 2015,” Salimgereyev said, adding that after modernisation of all three refineries, the need for a fourth plant may arise sometime after 2025.

People’s IPO

KazTransOil (KTO), which is a part of KazMunayGas, was the first launch in the “People’s IPO” programme. According to official reports, this debut was a success. The value of KazTransOil shares placed as part of the programme by December 2013 increased by 21%, exceeding 880 tenge per share.

“In July 2013, KazTransOil paid dividends for 2012 worth 28.8 billion tenge (US$186.2 million), of which, 2.9 billion ($US18.7 million) were bought by minority shareholders,” Salimgereyev stated.

However, he announced that KazMunayGas does not intend to go into the securities markets in the near future.

“KazMunayGas is amongst the third tier companies (in the People’s IPO programme), its shares can be placed after 2015. As of late, neither the government nor the Samruk Kazyna Fund have made the decision to place shares on the securities markets,” the speaker said.

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