Kazakh Energy Bosses Upbeat on Oil, Gas Future

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Kazakhstan remains committed to its long-term plan to increase oil and condensate production to 100 million metric tons per year (2.1 million barrels per day), a 10% increase from current levels, and has sufficient reserves to produce much more than that, Energy Minister Bolat Akchulakov told Energy Intelligence at the St. Petersburg International Economic Forum. “We have not yet passed even one-third of our potential,” he said. “The question is whether it is necessary to produce, who should produce that much and who is ready to invest.”

Akchulakov, who was promoted to minister in January following the wave of protests in the country, said Kazakhstan would increase output by 12 million tons/yr (260,000 b/d) by 2025, once the $45 billion expansion of the Chevron-operated Tengiz project is completed. He said production this year is earmarked at 87 million tons/yr, a slight increase from last year.

The head of state oil company Kazmunaigas (KMG), Magzum Mirzagaliyev, shed some more light on future production increases. He was also part of the Kazakh delegation to the St. Petersburg forum led by the republic's president, Kassym-Zhomart Tokayev, who was the highest-ranking foreign dignitary in attendance.

Mirzagaliyev told Energy Intelligence that output at the giant offshore Kashagan field would increase in three mini-stages — 1a, 2a and 2b — each of which would involve the construction of a new onshore gas-processing plant. The first, with a 1 billion cubic meter per year capacity, is under construction and would lift oil output by 25,000 b/d within two years, while the second, for 2 Bcm, would add another 50,000 b/d, he said. Kashagan is now producing around 400,000 b/d of crude, having reached its Phase 1 plateau over three years ago.

Lukoil Takes a Look

There are other fields in Kazakhstan’s sector of the Caspian Sea that are due to come into production in the coming years, Mirzagaliyev said. These include the Kalamkas More and Khazar fields that were relinquished several years by the Kashagan consortium on the grounds of being too costly to develop, and are now being looked at by KMG and Russia’s Lukoil. According to the two partners’ development plan, the two fields could produce 3 million-4 million tons/yr (60,000-80,000 b/d) of crude, Mirzagaliyev said, but he stressed these were “basic calculations” that needed to be firmed up. Production could start up as early as 2028, he said.

As it seeks to grow production, Kazakhstan is looking at new ways to export its oil, after flows via the Caspian Pipeline Consortium (CPC) pipeline were disrupted in March and April due to a storm that damaged two of the three single point moorings at the Russian Black Sea terminal of Yuzhnaya Ozereyevka near Novorossiysk. When the accident happened, “we started looking at all the options,” Akchulakov said, and calculated that there were 16 million-17 million tons/yr of "immediate" capacity available. These included transit across Russia, taking oil by pipeline to China and using the Aktau seaport. He said Aktau has the capacity to ship an extra 2 million tons/yr of crude on top of the 10 million tons/yr it already handles.

He did stress, however, that CPC, which has a capacity of 1.4 million b/d, will remain the principal outlet for Kazakh producers. “CPC is very important to us, no matter what happens.”

Gas Demand Grows

Maximizing gas output is another priority for Kazakhstan, especially as domestic gas demand continues to creep up. Mirzagaliyev said gas exports, which amounted to 8 Bcm-9 Bcm/yr, mostly under a long-term sales contract with PetroChina, are declining because the country needs more gas for itself.

With that in mind, Kazakhstan’s gas transmission company, Qazaqkaz, signed a deal at the St. Petersburg forum with Russian giant Gazprom to increase the amount of gas it processes at the Orenburg plant in southern Russia from 8.1 Bcm/yr to 11 Bcm/yr. Most of the extra gas will go to Kazakh industrial and household consumers.

Russia's Tatneft and KMG signed an agreement of intent during the forum to implement the Karaton-Sarkamys exploration project in the Atyrau region of Kazakhstan. The block is close to the Tengiz field, the Korolevskoye oil fields and a group of fields owned by local oil producer Embamunaigas.

The agreement reaffirms last year's pact between Tatneft and KMG on joint projects in Kazakhstan, including exploration, as part of the Russian firm's drive to expand business outside its home region of Tatarstan.

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