Dodsworth, J. R., P. H. Mathieu, and C. Shiells, 2002, “Cross-Border Issues in Energy Trade in the CIS Countries,” IMF Policy Discussion Paper 02/13 (Washington: International Monetary Fund).
IMF, 2003, Republic of Kazakhstan—Selected Issues and Statistical Appendix, IMF Country Report No. 03/211 (Washington: International Monetary Fund).
Mathieu, P., and C. Shiells, 2002, “The Commonwealth of Independent States’ Troubled Energy Sectors,” Finance & Development, Vol. 39 (September), pp. 34–38.
Republic of Kazakhstan, 2002, “The Concept of the Development of the Gas Sector of the Republic of Kazakhstan Until the Year 2015,” Government Resolution No. 25, January 11.
Republic of Kazakhstan, 2003a, “Development Plan for the National Company KazMunaiGaz, JSC for 2004-06,” Draft Government Resolution, September.
Republic of Kazakhstan, 2003b, “On the State Program for Development of the Kazakhstani Sector of the Caspian Sea,” Presidential Decree No. 1095, May 16.
This projection is based on the winter 2004 World Economic Outlook price forecast for petroleum through 2008 with a 2 percent nominal increase thereafter to reflect world inflation. See Table 4 for details.
Observers have put the Caspian basin reserves (including those belonging to Azerbaijan, Iran, Russia, and Turkmenistan) on a par with those of the North Sea. The authorities believe that hydrocarbon deposits on the Kazakhstani territory of the Caspian Sea Basin total some 15 billion metric tons or about 110 billion barrels.
On average, a metric ton (MT) of Kazakhstani crude oil was equivalent to around 7.6 barrels in volume terms in 2003. Kazakhstani crude varies considerably in quality—the older fields are close to the heavy Russian Urals blend (7.3 bbls/MT), while newer fields are much lighter: Tengiz (7.9 bbls/MT); Karachaganak condensate (8.1 bbls/MT); and Kashagan (about 7.8 bbls/MT). As a result, the average number of barrels per MT is expected to continue to rise over the medium term.
Natural gas in Kazakhstan is almost entirely associated gas (a by-product of oil extraction) and several fields reinject significant quantities of gas into the ground to maintain crude wellhead pressure for liquids extraction. In the long term, when the liquids are exhausted, this gas can be recovered. Flaring has declined steadily, although it remains significant owing to the stranding of associated gas. In addition to efforts to build pipeline links to the existing system for domestic and foreign sale, gas has been used increasingly for electricity generation.
The CPC pipeline is a privately operated consortium with official Kazakhstani and Russian state participation. It runs 1,500 kms from the Tengiz area to the Russian Black Sea port of Novorossiysk. In 2003, two large fields (Aktobe and Karachaganak) were linked to the CPC, significantly cutting transport costs for both fields, and substantially raising export prices for Karachaganak. Initial capacity is rated at 28 million MT per annum (0.6 million bbls/day). Planned second and third phase expansions over the next few years will raise capacity to 67 million MT per year (1.4 million bbls/day).
Lukoil and KMG signed an equal-share joint venture agreement to develop the Tyub-Karagan field in December 2003. Recoverable reserves of 100 million MT (about 750 million barrels) and an exploration program totaling $150-170 million were announced. KMG and Rosneft are also jointly developing the Kurmangazy field, which is reported to have reserves in the range of 0.75-1 billion MT (5.5-7.7 billion barrels).
The outlook for natural gas is largely drawn from Republic of Kazakhstan (2002). See also Republic of Kazakhstan (2003a and 2003b).
See IMF (2003) for a more comprehensive discussion. See also Dodsworth et al. (2002); and Mathieu and Shiells (2002) for a more detailed discussion of the trade-distorting effects of the state-owned energy monopolies in oil and gas in the countries of the Former Soviet Union.
Essentially, the full capacity of the Atyrau-Samara pipeline (15-16 million MT) has been allocated to Kazakhstan (up from 10 million MT in 2001). Moreover, a quota of 2.5 million MT was agreed for shipments through the pipeline from the Russian Caspian port of Makhachkala to Novorossiysk. The crude oil reaches Makhachkala by ship across the Caspian Sea from the Kazakhstani port of Aktau.
A quality bank is an equalization scheme to compensate shippers for quality differentials between the types of crude oil mixed in a pipeline. The absence of such a mechanism penalizes lighter and sweeter crudes such as those from the newer Kazakhstani fields. National treatment (implying non-discriminatory pricing) for transportation services for oil and gas as well as rail and other infrastructure is one of the objectives driving the economic integration initiatives of Kazakhstan with Russia and other major CIS countries.
The BTC pipeline is presently under construction and is expected to begin operations by early 2005 with a capacity of 50 million MT per annum (1 million bbl/day). Capacity could be increased to 1.4 million bbl/day using flow enhancers and to 1.7 million bbl/day with additional pumping stations. By-passing Armenia and the Black Sea, the line follows a very indirect route to the Mediterranean.
The line from western Kazakhstan, which would total some 3,000 km, could be built in sections, connecting and reversing the flow of current lines from Kenkiyak to the CPC, through the landlocked Kumkol fields, and onwards to western China. The first section of about 1,000 km would run from the rail oil terminal facility at the Atasu station in the central Karaganda region to the Druzhba-Alashankou station on the Kazakhstani-Chinese border. The complete line could potentially be operational by 2007. Capital costs would be quite high (around $2-3.5 billion), as would the minimum through-put for the line to be economic (20-50 million MT/year; 0.4-1.0 million bbls/day).
This has been a major concern at Tengiz (the world’s deepest “super-giant” oil field), where the open stock of large quantities of low-value solid sulfur has caused major disputes with local authorities.
The other North Caspian fields are assumed to be equivalent in size to Kashagan, with production beginning in 2011. This could be a significant underestimate.