According to the US Energy Information Administration (EIA), Kazakhstan, an oil producer since 1911, has the second-largest oil reserves as well as the second-largest oil production among the former Soviet republics after Russia.
|Kazakhstan's energy consumption by fuel, 2012. From EIA.|
Kazakhstan is a major oil producer. The country's estimated total petroleum and other liquids production was 1.70MMbbl/d in 2014. The key to its continued growth in liquids production from this level will be the development of its giant Tengiz, Karachaganak, and Kashagan fields. Development of additional export capacity will also be necessary for production growth.
Although Kazakhstan became an oil producer in 1911, its production did not increase to a meaningful level until the 1960s and 1970s, when production plateaued at nearly 500,000bbl/d, a pre-Soviet independence record production level. Since the mid-1990s and with the help of major international oil companies, Kazakhstan's production first exceeded 1MMbbl/d in 2003.
Rising natural gas production over the past decade has boosted oil recovery (as a significant volume of natural gas is reinjected into oil reservoirs) and decreased Kazakhstan's reliance on natural gas imports. Natural gas consumption, however, has been stagnant as the infrastructure and expense required to connect Kazakhstan's widely dispersed population to production centers in the country's northwest has impeded development.
Kazakhstan is landlocked and is far from international oil markets. The lack of access to the open ocean makes the country dependent mainly on pipelines to transport its hydrocarbons to world markets. Kazakhstan is also a transit country for natural gas pipeline exports from Turkmenistan and Uzbekistan.
Kazakhstan consumed a total of 2.8 quadrillion Btu of energy in 2012, with coal accounting for the largest share of energy consumed at 63%, followed by oil and natural gas at 18% and 16%, respectively.
Kazakhstan is a Caspian Sea littoral state. The legal status of the Caspian area remains unresolved, mainly driven by a lack of agreement on whether the Caspian is a sea or a lake. Until all states agree on a definition, legal status of the area will remain unresolved.
Over the past decade, annual gross natural gas production almost tripled, from 0.6Tcf in 2003 to 1.6Tcf in 2012. Reinjected natural gas has accounted for most of the increase in gross production, while dry natural gas production has remained relatively stable. In 2012, reinjected natural gas production was more than double dry natural gas production.
Kashagan offshore facilities.
Image from North Caspian Operating Company.
In 2013, the Karachaganak and Tengiz fields combined accounted for more than 90% of Kazakhstan's raw marketed natural gas production. The Tengiz project includes a gas processing plant, which according to Chevron produced 251Bcf of dry marketed natural gas in 2013 that was sold to local consumers. The Karachaganak project has insufficient gas processing capacity. Most of the raw marketed production from the Karachaganak field has to be exported to Russia to be processed at a gas processing plant in Orenberg. In 2013, about 30% of this processed gas was sold in Russia, with the remainder of the dry gas returned to Kazakhstan to help meet local demand. The next phase of development at Karachaganak originally included plans for facilities to process its own gas and boost dry natural gas supplies to consumers within Kazakhstan. However, the project developers have since changed their plans, and gas produced under Karachaganak's next expansion will largely be reinjected into the field to boost liquids recovery.
When it comes online, the first phase of the Kashagan project is expected to marginally boost supplies of dry gas to consumers in Kazakhstan. However, like the Karachaganak and Tengiz projects, much of the gas produced from Kashagan will be either reinjected into the well to boost liquids recovery or used at the project site to produce electricity.
Consumption, imports, and exports
Kazakhstan has two major export pipelines for natural gas. The Central Asia Centre pipeline (CAC), which traverses the western edge of Kazakhstan on its way to Russia and points further west, and the Turkmenistan-China pipeline, which traverses the southern edge of the country on its way to China. Both pipelines are part of the regional Caspian export infrastructure and mainly carry natural gas exports from Turkmenistan, along with smaller but still significant volumes of exports from Kazakhstan and Uzbekistan. The CAC pipeline also serves local natural gas demand in western Kazakhstan, including northwestern Kazakhstan where most of the country's production is located. A third major pipeline, the Bukhara-Tashkent-Bishkek-Almaty pipeline serves local demand in southern Kazakhstan with imported gas from Turkmenistan and Uzbekistan. Two of Kazakhstan's three underground gas storage facilities are located along this pipeline.
The domestic pipeline system in Kazakhstan is underdeveloped. Natural gas production in the country is concentrated in the northwest and is not connected to population centers in the south, north, center, and east. A government objective is to develop a domestic natural gas system that would connect the country's producing and consuming areas. Kazakhstan is already on its way to meeting the first part of this challenge, connecting the existing gas pipeline infrastructure in the West to the existing infrastructure in the densely-populated South. The Beineu-Bozoi-Shymkent pipeline is under construction and is expected to be completed by the end of 2015 with a capacity of approximately 350Bcf per year. This pipeline will allow Kazakhstan to gasify communities along the route of the pipeline that previously had no access to gas. It will also connect to the existing pipeline serving southern Kazakhstan, replacing imported natural gas in those markets. Finally, it will connect to the pipeline to China, allowing production from northwestern Kazakhstan to be exported to China.
Plans for gasifying other parts of the country and connecting them to the existing infrastructure in the West and South are more uncertain. The vast distances and relatively low population density in the north, center, and east make the economics challenging for any potential gas pipeline projects to serve the region.
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