Gas boom in Kazakhstan

Many world biggest oil companies are directed towards West Kazakhstan. A Russian oil company "Lukoil" is not an exception.

Recently representatives of nearly all branches of this oil magnate, as well as biggest international banks and journalists of world information agencies visited West Kazakhstan oblast. The tour was organised by "Lukoil" itself and dedicated to a familiarisation with the investment climate of West Kazakhstan oblast.

The neighbours did not conceal their wish to make their investments into interesting projects. Moreover, the region is not new for the company: "Lukoil" possesses a 15% share in Karachaganak project.

The development of the third phase of Karachaganak project along with the gas project realisation is a good basis for investments to justify the hopes. Until recently the gas project fate was doubtful. Especially with regard to where it had to be realised. The Russian party was proposing in relation with this to increase the capacities of Orenburg refinery and re-construct it, taking into consideration that currently all the gas from Karachaganak was being delivered exactly there. The president of Kazakhstan finalised this issue during his August visit to Karachaganak. The gas project will be realised in Kazakhstan, on the territory of West Kazakhstan oblast.

By the end of October it is suggested to complete the project feasibility study, after which a contract on its realisation must be signed. Its cost is estimated in 1.2 billion USD. For WKO it's a unique possibility to rectify its economic condition. For the oil companies - another chance, - to get their share in the project. The gas project suggests a construction of 12 petrochemical enterprises and apart from that a gas refinery construction. Except for domestic requirements, all the produced gas will go for sale. Kazakhstan today occupies a 15th place in the world in gas production and Karachaganak is its main producer, followed by Tenghiz, and in the future maybe Kashagan. Whether the gas project will be realised on the basis of Karachaganak or some other place is still unknown. The development of small fields is still important for the region, including Kamenskoye and Teplovsko-Tokarev group fields. Therefore the interest of Lukoil in the Western region of Kazakhstan is understandable, moreover, because it borders with five Russian oblasts territorially. And Teplovsko-Tokarev group fields are located on the border with Russia.

By 2019 Kazakhstan is going to increase the gas production to 80 billion cubic meters per annum. And then the country can encounter the gas transportation problem. Therefore already now the authorities develop a project of extension of Atyrau-Samara gas pipeline. Its capacity may reach 25 million tons per annum. Another point is that guarantees of oil companies that will transport its production are needed. Today "Kaztransoil" negotiates on this guarantee.

An extension of Atyrau-Samara gas pipeline is supposed to get started not later than 2006. And then its completion phase by phase will start. According to the head of industrial policy department of the Ministry of Energy and Mineral Resources of RK Mussabek Issayev, in a more favourable situation Kenkiyak-Atyrau pipeline could be connected to Atyrau-Samara pipeline. The main target of the young republic is to deliver its gas to the world market. It is desirable to be independent from the neighbours on this issue. But the domestic market should not be forgotten either, with its demand reaching 2 billion cubic meters.

In the nearest future Astana, Karaganda and Southern parts of the country are going to be provided with Karachaganak gas. Today the South of the country wholly depends on Uzbek gas. The ill-tempered neighbours are not very constant. The lack of gas in the Southern region can reach 6 billion cubic meters, therefore the Ministry of Energy and Mineral Resources believes that it makes sense to build up a gas pipeline from the North to the South to reach an independence from the Uzbek gas.

From 80 billion cubic meters proposed to be produced by 2019, 40% must be sold somewhere. It is necessary to study the markets in detail. Currently the markets of China and Turkey are studied. Although recently some Asian countries declared that it was inexpedient to construct a pipeline from Kazakhstan to China. Kazakhstani authorities, according to Issayev, are going to study the Chinese market, whose demand is very big. Currently a working group, a co-ordinating council, have been established that study an opportunity and an expediency of a construction of Aktassou-Alazhankol pipeline, a feasibility study is being prepared.

The length of the pipeline will make 1200 kilometres. It is suggested that the construction will be completed by 2006. Although several analysts don't exclude that China would not need Kazakh gas due to Iraqi and Iranian production getting cheaper. In Kazakhstan they think otherwise, they are sure that the Iraqi and Iranian oil will not influence the development of oil & gas sector on Kazakhstan in any way.

Moreover, according to the president of RK Nursultan Nazarbayev, the development of world economy shows that in the nearest 25 years the demand for hydrocarbons will grow by 25% on the world market.

And China, with which Kazakhstan currently works, is an unlimited market for that. Officials lay big hopes on a newly established "KazRosGas" JV, which is going to refine Kazakhstani gas on the territory of Russia, delivering a part of it to the European market.

However, those are tomorrow worries. Today even West Kazakhstan oblast, where there are main gas resources in the country, perceives a lack of this product. Our own Karachaganak gas refined in Orenburg is bought from there on a double price. The gas project realisation and an increase of gas production are first of all related by Kazakhstanis with a satisfaction of their own needs. They hope that at last the gas will become available.