Oil and Gas Producers Sum up the Results
Elvira Djantureyeva, Ph. D in technical sciences, head of the Mining Results Analysis Department, Kazgeoinform, Geology and Mining Committee under the Ministry of Energy and Mineral Resources of Kazakhstan
The past decade was a time of reforms for Kazakhstan's mineral resources complex as the extractive sectors switched to a market scenario. Over that period, a contract mining system and legal framework encouraging substantial investment in the real sector of the economy and ensuring national security have been developed. As for the economic assessment of domestic deposits, this is currently carried out by using international expertise and taking account of the forecasts in the global energy market. Kazakhstan is among the ten countries with the largest explored oil reserves. This fact determines the subsequent development of the oil and gas sector, i.e. accelerated development of the Caspian shelf and expanding the opportunities for transporting energy to international markets.
Today only nine countries outstrip Kazakhstan in terms of explored energy reserves: Saudi Arabia, Canada, Iran, Iraq, Kuwait, Abu Dhabi, Venezuela, Russia and Libya. Our country accounts for around 3% of global oil reserves and 1% of global gas reserves. More than half of the prospective reserves – approximately 13-18 billion tonnes – are located in the Caspian Sea off Kazakhstan.
As of 1 January 2005, there were 191 oilfields, 101 gas deposits and 49 condensate deposits on the the country's balance sheet. Most of them are located in the west of the country. Around 71% of mineable reserves of oil are accounted for by Atyrau Oblast (Province), 14% Mangistau Oblast, and 6% Aktobe and Western Kazakhstan Oblasts each. The remainder is shared by Kyzylorda Oblast (2%) and Karaganda Oblast (1%).
More than a half of the gas reserves are contained in the fields of Western Kazakhstan Oblast (57%), while Atyrau, Mangistau and Aktobe Oblasts account for 14%, 12% and 11% respectively. Another 6% is located in the southern part of the country.
Looking at the reserves' breakdown by mining groups, the leading position of Agip Kazakhstan North Caspian Operating Company N.V. (Agip KCO) and Tengizchevroil is obvious: they account for 67% of total mineable reserves of hydrocarbons. The companies are among the thirteen largest companies developing a total of 78 energy fields, which makes up 92% of the total mineable reserves in the country. The remaining medium- and small-sized companies account for 116 deposits containing only 8% of energy reserves. The average availability of explored reserves in the sector is 80 years, but this indicator is half that for large companies. (Table 1).
The structure of registered energy resources comprises fields that are developed (50.3%), explored (43.3%), ready for commercial development (5.8%) and abandoned (0.6%). Only 3% of total mining sites are 'idle'.
In the period 1996-2005, the total increase in registered reserves (categories ?+?+?1) due to investment by mining companies was 1,134.3 million tonnes of oil, 33.1 billion m³ of gas and 147.4 million tonnes of condensate. In 2002, the huge Kashagan oilfield accounted for an increase in oil reserves, geological and mineable reserves of oil and associated components which were approved for the Tengiz field. Lesser commercial discoveries followed: offshore Kalamkas, Aktoty and Kairan. As a result, the country's oil reserves almost doubled.
Over the past decade, there has been a trend when the increase (1,134.4 million tonnes in 1996-2005) in explored reserves outstrips the consumption (365.4 million tonnes over the same period), which is positive for the prospective development of Kazakhstan's oil and gas sector. (Chart 1).
As of 1 January 2006, 144 companies were engaged in mining, including 21 joint ventures, 54 foreign companies and 69 domestic companies. Work was underway at 230 mining sites, including 142 oilfields, 56 oil and gas deposits, 19 oil and gas condensate fields, six gas condensate fields, six gas deposits and one underground gas holder. Geological exploration was carried out at 52 sites (23%), production at 90 sites (39%) and combined exploration and production at 88 sites (38%).
In 2005, annual oil and gas condensate output more than doubled compared with 1998, coming to around 60 million tonnes. Just like in previous years, Tengizchevroil headed the list of the largest oil producers: 13.5 million tonnes (24% of the total oil produced). It was followed by production branches of Kazmunaigaz: Uzenmunaigaz with 6.5 million tonnes or 12% and Embamunaigaz with 2.8 million tonnes or 5%; as well as CNPC-Aktobemunaigaz (5.8 million tonnes or 10%), Mangistaumunaigaz (5.7 million tonnes or 10%), Turgai-Petroleum (3 million tonnes or 5%), Petro Kazakhstan Kumkol Resources (3.1 million tonnes or 5%), Karazhanbasmunai (2.2 million tonnes or 4%), Kazgermunai (1.9 million tonnes or 3%), and Kazakhoil Aktobe (1.3 million tonnes or 2%).
Output of gas came to around 27 billion m³ in 2005, with Karachaganak Petroleum Operating B. V. accounting for the bulk of it: 11.5 billion m³ (44% of the total output), Tengizchevroil accounting for 7.3 billion m³ (28%), CNPC-Aktobemunaigaz 2.7 billion m³ (10%) and Uzenmunaigaz 1.2 billion m³ (4%).
The forecasts are as follows: it is planned to produce 62-63 million tonnes this year; 100-115 million tonnes in 2010, and 120-150 million tonnes of oil and gas condensate in 2015 (Chart 2). An average of some 85% of the total produced hydrocarbons is designed for export.
As noted above, Kazakhstan plans to produce up to 150 million tonnes of oil per year by 2015, with 127.5 million tonnes exported, given that production dynamics are favourable. As a result, the country will be able to export up to 110 million tonnes of energy by 2015, taking account of the established quotas for existing pipelines. (Chart 3).
Today 81% of oil is exported via pipelines, 12% by rail and only 7% by water transport.
The Caspian Pipeline Consortium (CPC) is still the only completed project. In 2006 the quota for transport of Kazakhstani oil via CPC will be 32 million tonnes; by 2010, it will grow to 45 million tonnes (the total flow rate of the pipeline is 67 million tonnes).
The Atyrau-Samara pipeline, which was commissioned as far back as 1972, remains a key route for exporting oil via the Russian pipeline network. Under a project for expanding its flow rate, the pipeline's capacity will increase from 15 million tonnes to 25 million tonnes of oil per year.
As for the Baku-Tbilisi-Ceyhan (BTC) route, an inter-government agreement was signed between Kazakhstan and Azerbaijan envisaging the Aktau-Baku system for transporting Kazakhstani oil via BTC. Quite possibly, a submarine pipeline string will be constructed. In the initial phase, 7.5 million tonnes of energy will be exported via this route; the figure will subsequently rise to 20 million tonnes.
In December 2005 the construction of the Atasu-Alashankou pipeline was finished. The pipeline is part of the future trans-national West Kazakhstan-China pipeline and is of critical importance for the country's economy in view of the growing oil consumption by China. The initial flow rate of Atasu-Alashankou is 10 million tonnes per year. It will increase to 20 million tonnes by 2008. In fact, the West Kazakhstan-China route will only reach its maximum capacity of 50 million tonnes per year by 2035. Up to 2015, Kazakhstan will be exporting 20 million tonnes per year to China.
Investment in mining of oil and gas sites has had a priority status if we look at investing in the entire mining complex. This is clearly demonstrated by an elevenfold increase of hydrocarbon investment in 2005 as compared to 1996. Whereas around $946.9m or 53% of the total investment in the mining complex ($1,770.6 million) was directed to the oil and gas sector ten years ago, in 2005 the indicator came to more than $10.09 billion or 80% of $12.647 billion invested in the mining complex in general. A total of $40.6 billion has been drawn down in the energy mining sector over the decade, with $33.5 billion accounted for by production and $7.1 billion by geological exploration. In 2005 alone, $2.1 billion and $7.9 billion were invested in geological exploration and production, respectively. In 2006, it is planned that $10.7 billion will be invested in hydrocarbon mining, with $2.3 billion spent for exploration and $8.4 billion production (Chart 4).
Major investors in 2005 were Agip KCO with $3,044.3 million, Tengizchevroil with $1,557.1 million, Mangistaumunaigaz with $1,160.8 million, Uzenmunaigaz with $845.3 million, KPO with $546 million, CNPC-Aktobemunaigaz with $540.5 million, Embamunaigaz with $355.5 million, Karazhanbasmunaigaz with $310.8 million, Turgai-Petroleum with $178.4 million, Petro Kazakhstan Inc. with $172.8 million, Kazakhoil-Aktobe with $154.7 million and CNPC International (Buzachi) Inc. with $105 million. The total investment of these 12 companies came to $8,971 million last year (89% of the total investment in the mining of oil and gas), with Agip KCO, Tengizchevroil and Mangistaumunaigaz accounting for around 60% of this amount. The other companies accounted for $1,119 million (11% of the total investment in energy mining).
Over the past decade, the role of foreign investment has increased. Whereas their share in the total investment in energy mining was 36% in 1996, it reached 85% by the end of 2005. Compared with 1996, the foreign direct investment and investment by companies with foreign participation increased by 25 times to $8.6 billion in 2005. Last year, major countries investing in Kazakhstan's oil and gas sector were the USA (39%), Indonesia (26%), China (14%), and Canada (12%). Britain and Britain's Virgin islands accounted for 2% each, Gibraltar, Russia, Germany and Moldova accounted for 1% each.
According to forecasts by the Energy Ministry, the investment appeal of Kazakhstani oil and gas fields will keep growing over the next ten years. It is planned that in 2006-2010 foreign and home investment in the fields will be $32.3 billion; another $34.2 billion will be invested in 2011-2015.
Activities by mining companies have a positive impact on the socio-economic development in the regions and in the country as a whole. In all, around $13 billion were paid to the national budget in taxes and other payments (royalties accounted for 24% of the sum). Foreign companies and joint ventures paid the lion's share: 85%.
Over the past ten years, the number of people employed under energy mining contracts has grown from 30,000 to 39,000. The local staff re-training funds increased by 14 times in 2005 against 1996, coming to $57.2 million. Regional community and infrastructure development spending increased by 7.5 times to $155.8 million.
The costs for subcontracting in the mining sphere increased sharply as compared to 1997: by 35 times. Last year, $7.2 billion or 71% of the total investment in energy mining sites was spent for subcontracting. Around $2.3 billion or 32% of this amount was drawn down by local subcontractors.
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