Election in Kazakhstan Seen Preserving Status Quo

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Kazakhstan, Kassym-Zhomart Tokayev

Western investors in Kazakhstan are breathing a sigh of relief after President Kassym-Zhomart Tokayev secured another seven years in office after winning snap elections with slightly more than 80% of the vote, according to preliminary results.

Tokayev's victory, while widely predicted, comes at a critical time as the former Soviet republic looks to loosen ties with its northern neighbor Russia and develop closer relations with Europe and China.

It is keen to reduce its dependence on Russian oil export infrastructure and in particular its dependence on the Caspian Pipeline Consortium (CPC) pipeline and marine terminal, which have been plagued by a series of disruptions this year.

The International Energy Agency (IEA) estimates that Kazakhstan's production of crude oil and condensate has recently been running at around 2 million barrels per day, picking up from 1.62 million b/d in October.

The presidential election was also held shortly before the long-awaited initial public offering of shares in national oil company Kazmunaigas.

Tokayev — a former foreign minister and prime minister who succeeded his long-serving predecessor Nursultan Nazarbayev in 2019 — called early elections in September to consolidate his power and push through political and economic reforms.

Earlier in the year, Kazakhstan's parliament approved changes to the constitution that lengthened the president's term from five to seven years, but barred incumbents from seeking re-election.

Status Quo Preserved

Western business people in Kazakhstan seek Tokayev offering continuity and stability, and do not expect him to try to renegotiate long-term contracts or interfere with the operations of international oil majors, such as Chevron, Shell, Eni or Exxon Mobil.

"This was no surprise at all. Everyone knew he would be re-elected," said a veteran oil executive in Kazakhstan.

"Tokayev won't do anything too dramatic. He will let the oil companies operate as before and try to persuade them to invest more money in renewables. He knows how important they are to the Kazakh economy."

Kazakhstan hopes to increase oil output beyond the 2 million b/d mark in the next two years via expansion of the giant Tengiz onshore field, which is operated by Chevron and currently produces some 650,000 b/d.

If all goes to plan, Tengiz will be producing an additional 240,000 b/d from 2024, when the project is due for completion. Chevron holds a 50% stake in the Tengizchevroil joint venture, alongside Exxon (25%), Kazmunaigas (20%) and Russia's Lukoil 5%.

Another giant oilfield that is set to increase output in the coming years is Kashagan, which currently produces around 400,000 b/d of crude and is being developed by a seven-member consortium known as the North Caspian Operating Co.

The consortium — whose members include Exxon, Shell, Eni and TotalEnergies — plans to increase production towards the 500,000 b/d mark in the coming years by debottlenecking existing facilities and increasing the reinjection of gas.

Renewable Energy

Tokayev is also putting greater emphasis on renewable energy, in line with Kazakhstan's commitment to achieve net zero emissions by 2060.

Although renewables still make up a tiny portion of the country's overall energy mix, several wind and solar projects are under development, with Eni and Total among the investors involved.

Looking further ahead, Kazakhstan wants to become a regional hub for production of green hydrogen.

Swedish-German firm Svevind Energy signed an agreement with the government last month to build a big new green hydrogen complex in Kazakhstan's western region of Mangistau.

Elections, Policy and Regulation, Fiscal Terms
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