CSI - Center for Strategic Initiatives
CSI - Center for Strategic Initiatives

Key events in the energy sector of the Republic of Kazakhstan

Energy Outlook 2020

December 1, 2020


Key events in the oil and gas market in the world

Key events in the energy sector of the Republic of Kazakhstan

Strategist’s Tools

Rating of oil producing companies in Kazakhstan

Oil, gas condensate and natural gas production in Kazakhstan peaked in 2019

In 2019, oil reserves in Kazakhstan grew by 210 million tons

Mineral reserves growth in 2019:

-oil – 210 million tons

-gas – 51 billion m3

-condensate – 12.8 million tons

In 2019, subsoil users allocated 170 billion tenge of investments for geological exploration (178 billion in 2017). At the same time, 70% of investments were in the oil and gas sector

In 2019, KPO celebrated 40th anniversary of Karachaganak Field

Following the results of 2019, the largest scheduled preventive maintenance repair in KPO history was successfully completed

The consortium partners signed an agreement to approve the Project of the 4th gas re-injection compressor unit

The 5th infield pipeline was put into operation

Production of oil and gas condensate in Kazakhstan, million tons

Natural gas production in Kazakhstan, billion cubic meters

It is planned to continue actively attracting investors in geological exploration of Kazakhstan

An oil fountain struck at the field in Mangistau region

In June 2020, a fountain inflow of oil was received at the exploration block Bekturly East

Operator - "Becturly Energy Operating" LLP (KMG 50% and "Kokel Munai" LLP 50%)

Ministry of Ecology is developing a marketing strategy to attract foreign investors in geological exploration

June 2020: The Ministry of Ecology discussed drafting the strategy with IHS Markit. It is planned to organize road-shows in the major world centers to attract investors and present investment and geological potential of the Republic of Kazakhstan

For subsoil users, electronic auctions were introduced from September 1, 2020

According to amendments to the Subsoil and Subsoil Use Code, the interested parties can participate in online auctions

Expected benefits: business convenience, availability of information, enhanced competitive environment

Kazakhstan's oil companies are adapting to the consequences of the coronavirus crisis

Kazakhstan reduced oil production under OPEC+ obligations

Kazakhstan supported an agreement to reduce oil production in the framework of OPEC+. This meant that oil production in the country should not exceed 1.319 million bpd in May-July 2020

May 2020: obligations fulfilled by 71%, Kazakhstan pledged to compensate for reduction

June 2020: obligations fulfilled by 105%

July 2020: obligations fulfilled by 101% (1.313 mln bpd)

KMG gets ready for low oil price by the end of 2021

A short-term anti-crisis program with cost optimization for 2020-2021 was launched

KMG reviewed the organizational structure of the Corporate Center (CC), reduced the number of employees, revised salaries, and eliminated bonuses and bonuses for CC employees

In November 2019, KMG accelerated settlement of TCO prepayment facilities

In 2019, KMG reduced the debt burden mainly due to the accelerated settlement of TCO prepayment facilities in the amount of $2.25 billion (early repayment amounted to $1.25 billion). This was done in anticipation of the planned IPO

In 2016, KMG entered into a long-term contract with Vitol for the supply of TCO's crude oil and liquefied gas, which included the prepayment. Delivery terms are until the first half of 2021.

The minimum delivery volume of crude oil and liquefied gas is approximately 38 million tons and 1 million tons, respectively

On September 1, 2020, Tengiz started to re-mobilize key personnel at the production site

Due to COVID-19, the temporary reduction in the pace of work and staff at Tengiz affected both the Basic Production Division and Future Growth Project (FGP)

On July 15, 2020, TCO placed two $500 million and $750 million Eurobond issues with an interest rate of 2.6% and 3.2% per annum to finance the FGP's implementation. The repayment dates are August 15, 2025 and 2030

Moody's believes that this debt will not significantly alter TCO's credit profile, and operating performance remains high despite the coronavirus issues. Risks are with the timing of the FGP

The Union of Subsoil Users of Kazakhstan applied to the Government for tax vacations

The Union and the companies- subsoil users of the Kyzylorda region with 100% local content twice submitted their tax proposals to the government (on April 7 and May 5, 2020) and did not find a response from government agencies

Issues for immediate resolution:

-deferral of tax payments

-zero export customs duties on crude oil at up to $35 per barrel

Proposals in the short term:

-reduction of the mineral extraction

tax rate

review of pipeline tariffs, public hearings

Favorable conditions are being created to increase the level of processing in the oil and gas industry of Kazakhstan

In 2019, Kazakhstan fully supplied the domestic market with fuel

Gasoline production increased by 84%, diesel production by 36% and jet fuel production by three times after the refinery modernization

According to KMG data, three refineries are able to produce 24% more gasoline than market demand, and the nearest deficit will occur no sooner than 2032

Oil and gas chemical projects in Kazakhstan will be provided by natural gas

In June 2020, it was reported that the law was amended in the RK to provide natural gas for oil and gas chemical projects

The Order of the Minister of Energy of the RK dated April 29, 2020 № 165 approved the Rules of forming the list of investment projects for the production of oil and gas chemical products

Projects will be evaluated by a scoring system on criteria based on macroeconomic, social, environmental and technical indicators

KLPE and TCO signed an agreement on the basic conditions of interaction in the design of the "Gas Separation Unit" (GSU), August 2020

The GSU capacity is 9.7 billion cubic meters of gas. GSU is required for ethane extraction from dry gas. There are no such complexes in Kazakhstan

The GSU will be located at the Tengiz field for uninterrupted supply of raw materials to the polyethylene plant in the Atyrau region. A project for construction of such a plant with annual capacity of 1.25 million tons is being implemented

The shareholders of "KLPE" LLP are "United Chemical Company" LLP and "Polymer Production" LLP. On 26 June 2019, KLPE LLP was transferred to KMG's trust management

Production of high value-added basic gas and chemical products should become

the basis for the development of deep processing in the oil and gas industry


Key events in the oil and gas market in the world

Key events in the energy sector of the Republic of Kazakhstan

Strategist’s Tools

Rating of oil producing companies in Kazakhstan

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