Kazakhstan, which is ranked in the top 15 countries worldwide for proven oil reserves and top 20 for natural gas, would like to see increased development of its hydrocarbon sector.
State-owned KazMunayGas, which represents the interests of Kazakhstan in the oil and gas sector, is looking to increase the nation’s hydrocarbon reserves through exploration. Despite the unfulfilled hopes for the Kashagan project, Kazakhstan will continue its search for new oil and gas fields, both on land and at sea. The Eurasia Project aims to develop a vast area in the Trans-Caspian Lowland in Kazakhstan and Russia. The question is over the exploration of the deep and hard to reach Horizons field, which requires use of the most modern methods and technologies.
According to Minister of Oil and Gas Uzakbai Karabalin, the Eurasia Project can double the country’s hydrocarbon potential, which would allow Kazakhstan to gain permanent status as one of the top 10 hydrocarbon holders in the world.
Today, the volume of “black gold” produced in the country is just under 82 million tonnes per year. This year, this volume will increase by another one million tonnes. The lion’s share of the crude oil Kazakhstan produces is exported, providing additional solid income to the state budget and the National Fund. This year, Astana intends to diversify its export routes, giving preferential treatment to easterly and southward export routes.
About 60 percent of Kazakh oil is exported to the EU and less than one fifth flows to China. Karabalin recently said that Kazakhstan plans to strengthen three oil transport routes that previously were secondary directions. The first is the route through the South Caucasus (from the Caspian Sea through Azerbaijan and Georgia.) He recalled that Aktau Seaport ships 12 million tonnes of oil per year. The second direction to take on more oil is through Iran.
“If sanctions against Iran are lifted, we will have a set way of exporting from Aktau. In due time, we will have our oil flowing through the Iranian port of Neka. For us, this is a good path to the Persian Gulf,” Karabalin said.
Finally, the third route to see an increase in oil flow is that towards China. The country’s appetite for crude oil grows every year. The Ministry of Oil and Gas has developed and implemented a programme to deliver 20 million tonnes of oil to China per year.
Furthermore, Kazakhstan’s southern neighbours, Uzbekistan and Turkmenistan also need oil. That’s why with the completion of the second stage of the pipeline connecting Kazakhstan and China, hydrocarbon supplies headed in this direction will double. In addition, Kazakhstan’s northern neighbour Russia is very interested in the pipeline to China. Russia is interested in transporting 7 million tonnes of oil annually through Kazakhstan with the possibility of increasing it to 10 million tonnes per year in the future via the main pipeline system that connects Omsk, Priirtyshsk, Atasu and Alashankou.
This year, Kazakhstan supplied the Pavlodar Petrochemical Plant with fuel. Although located in Kazakhstan, the plant was previously fueled by Russian oil. Kazakhstan will supply enough oil to match the amount received from Russia in regards to exports to China; this type of practice is known as a swap operation.
New Eurasian Economic Union (EEU) agreements between Kazakhstan, Belarus and Russia are what made this win-win scenario as well as non-discriminatory access to each other’s transport systems possible. This agreement took effect Jan. 1 and expires Jan. 1, 2019. At the end of this period, the agreement will be automatically renewed for another five years.
Kazakh oilmen say cooperation with their partners in the Eurasian Economic Union gives them noticeable advantages. Today, thanks to the contracts signed last year, Kazakhstan can receive much needed petroleum products from Russia duty free. It is well known that Kazakhstan imports more than 30 percent of Russian petroleum products.
All this is reflected in the Treaty on the Eurasian Economic Union (EAEC), which is nearing completion and is expected to be signed on May 29 in Astana.