The Oil and Gas Complex of Kazakhstan: Basic Results in 2001
In recent years the development of the oil and gas sector has been more intense than in other sectors of the economy. In 2001 its share in the country’s GDP made up 8%. Although this is somewhat lower than over the previous year (due to a growth in the services sector), the share of the oil and gas industry in total industrial production keeps on constantly increasing. In 1997-2001 it doubled and came to 36.7%.
3,800 new jobs have been created in the oil and gas complex over the past year, while the number of enterprises in the sector remains unchanged. This is most likely due to the strict measures taken by the government of Kazakhstan as regards recruitment of foreign workers, allowing an increase in employment among locals.
Subsoil use rights were granted for 316 hydrocarbon deposits in 1994-2001. Today these have been withdrawn for 121 deposits. Of 195 active licences, 83 were issued for production, 81 for exploration and production and 31 for exploration only.Oil production increased by a factor of 1.5 in Kazakhstan from 1997-2001. In 2001 growth came to 17.1% (YOY). At the same time production of natural gas fell, and that of gas condensate reduced by 13%. The largest share of total crude production is held by Tengizchevroil (31%), followed by Mangistaumunaygaz (11%), Ozenmunaygaz (10%), Hurricane Kumkol Munay (9%), Aktobemunaygaz (8%), Karachaganak Petroleum Operating Company (10%), Karazhanbasmunay (3%) and Kazakhoil Emba (6%).
In 2001 the Atyrau region led the regional breakdown of oil production with 39% of the total amount. The Mangistau region accounted for 27%, Aktobe 9%, Kyzylorda 15% and Western Kazakhstan 10%.
Oil exports have been growing steadily in recent years. From 1997 to 2001 physical volume increased by 1.8 times, and they grew by 2.8 times in monetary terms. This is due to toughening of the state control over transfer prices, which in turn has led to higher rates of growth in profits from oil exports. The negative trend, as far as Kazakhstan’s economic security is concerned, towards an increase in the share of oil exports in the country’s total exports continues. Whereas in 1997 oil made up some 23%, in 2001 it grew to 49.39%.
It should be noted that in 2001 the physical volumes of oil exports increased by 21% against the previous year, but profits from oil exports did not change in monetary terms, as a result of the reduction in the average annual world oil price.
Despite this decrease, world prices for crude still remained quite high. All in all, the situation in the internal market of Kazakhstan corresponded to the trends observed in the international oil market: producers’ prices fell by 12%, contract prices by 14% and international prices by 13.6% (YOY). Nevertheless, in 2001 contract prices for crude in the CIS countries remained unchanged.
Tengizchevroil and Mangistaumunaygaz are, as previously, the basic exporters of oil in Kazakhstan. In 2001 the bulk of hydrocarbons was exported from Kazakhstan to international markets by oil pipelines (52%). 39% was transported by rail and the remainder by sea.
Investment. A considerable growth of investment in the oil and gas sector is connected with relatively favourable international prices for crude, and an improvement in the transport potential of Kazakhstan. In 2001 foreign direct investment (FDI) in the oil and gas sector grew by 64% to $3,287.8m. One of the main reasons for such a high influx of FDI was revenues from privatization of state property under contracts signed in 2000: the sale of a 5% state share in Tengizchevroil and a 30% one in Mangistaumunaygaz. In 2001 the share of FDI placed in the oil and gas sector made up 75% of the total FDI attracted to Kazakhstan.
Investment in fixed capital by oil and gas enterprises under various types of ownership also increased considerably: from $1,987.4m to $2,608.4m. This was largely due to financing of the emerging infrastructure of the Karachaganak gas condensate field, construction of the Tengiz and Kumkol fields and the building of the Caspian Pipeline.
In 2001 investment in geological exploration went up: an increase of 2.5 times on 2000. This influx resulted from an increase in financing large projects related to exploration in Tengiz and Kashagan.
The total amount of loans provided by commercial banks to the oil and gas sector grew by 1.5 times in 2001. The participation of second-tier banks in the development of the sector is still rather insignificant; their loans made up a mere 7% of the total amount lent to all sectors of the economy.
Taxes. Despite a notable decrease in prices for crude in international markets, taxes paid by enterprises in the oil and gas complex grew by 1.9 times during 2001. Perhaps this is a result of the monitoring of large taxpayers in the industry carried out by the State Revenues Ministry under the Law On Transfer Pricing. The share of the oil and gas sector in total tax proceeds increased from 10.7% in 1997 to 23.9% in 2001. The bulk of the taxes paid were accounted for by Tengizchevroil (42.9%), Hurricane Kumkol Munay (11.3%) and Mangistaumunaygaz (10%).
Invest in Astana! Adilbek Dzhaksybekov
Activities of Maersk Oil Kazakhstan GmbH Svend Andersen
Embamunaigaz: Still Up to the Mark Malik Omirzak
Oil Insurance Company: Cornerstone in Protecting Your Future! Zharkyn Alzhanov
Altynalmas: Marriage of Experience and Professionalism Nurlan Makulbekov
Helios Means First! Shukhrat Danbai
Brief Analysis of Draft Law ”On State Regulation of Production and Turnover of Certain Types of Petroleum Products” Olga Chentsova, Angelika Novozhilova
Kazakhstan and International Law Implications of the Proposed Law “On State Regulatory of Production and Turnover of Certain Types of Oil Products” Thomas C. O’Brien, Alyia M. Suleimenova
Outlook and Necessity for Developing Small Hydrocarbon Fields Elvira Dzhantureyeva
New Rules for the Purchase of Goods, Work and Services in the Performance of Petroleum Operations in Kazakhstan Olga Chentsova, Natalia Brainina
Certain Environmental Aspects of the Activities of Subsoil Users Aigul Kenjebayeva, Yuliya Mitrofanskaya
Issiue Deductibility of Interest on Foreign Currency Loans Bill J. Page, Gaukhar Iskakbayeva
Leasing in Kazakhstan: Legal Aspects of Development Tatyana Issyk