Information was prepared by Elvira Djanturaeva, PhD, the Head of Mineral Production Results Analysis, RCGI Kazgeoinform Geology and Subsurface Use Committee under the Republic of Kazakhstan Oil and Gas Ministry.
The 2009 year results showed that Kazakhstan turned out to be one of a few countries in the post-Soviet area, which continues showing positive economic performance indicators in the condition of the world crisis. In many respects, the sustainable development of our republic is achieved due to an effective investment policy, stability of legislation, availability of a rich mineral resource base and, as a consequence, high export potential.
At present, companies from 45 countries, including the largest world exporters from the USA, Netherlands, Great Britain, France, Italy, Canada, China, Japan, Russia, Switzerland and others, invest money in the mineral industry.
The total number of operating facilities related to the mineral industry was recorded at 2861, as of January 1, 2010. Among them, 916 facilities are at the republican level, including 273 engaged in raw hydrocarbons production, 424 in solid minerals production, and 219 in production of underground waters. The number of facilities engaged in production of common minerals is 1920, and in other operations not related to production – 25.
For the period of 1996–2009, the aggregate amount of investments in the mineral industry reached $131,095.1 million. Of this amount, $14,629.9 million was directed for geological exploration. Compared to 1996, the yearly capital investments increased by more than twelvefold and, based on last year’s results, were $21,376.1 million. $1,587.3 million, or 8% of the total amount, was spent for geological exploration operations (See Chart 2).
Chart 3 shows that $16,443.5 million (78%) was invested in raw hydrocarbons production, $4,602.3 million (22%) in solid minerals production, $77 million (less than 1%) in production of underground waters, and $202.8 million in common minerals production. If to consider the capital investments structure by the major types of solid minerals, the greater investments were made in production of uranium ($955.6 million), coal ($785.7 million), gold ($706 million), polimetalic ores ($662.4 million), iron and manganese ($563.1 million), copper ($531.7 million), and other (See Chart 4). The expenses for geological exploration within the sector were just 3% of the total amount of investments in the solid minerals production.
The investment activities of the companies engaged in the mineral production sector produce a positive effect on the socio-economic development of the country. In particular, the number of employees working under the mineral production related contracts increased from 141 thousand people in 1996 to 174 thousand, as of January 1, 2010. During 1996–2009, the mineral producers spent $2,060.2 million for social projects and local infrastructure ($314.4 million in 2009), $651.7 million for training of specialists ($127.9 million, respectively), and $797.1 million for buying technologies ($9.4 million, respectively).
During this time, $61,248.8 million was paid to the Kazakhstan budget as taxes and payments on mineral production. In 2009, the budget inflows amounted to $10,840.1 million, including revenues on the corporation income tax ($3,047.7 million, or 28% of the total tax revenues and payments), tax on mineral production ($3,270.9 million, or 30%), VAT ($112.1 million, or 2%), social tax ($192.4 million, or 2%), bonuses ($296.7 million, or 3%), and other payments and taxes ($3,920.2 million, or 36%).
Raw Hydrocarbons: Kazakhstan’s share in the world’s raw hydrocarbons reserves is 3% for petroleum and 1.5% for natural gas. 249 fields are recorded in the state balance sheet, including 216 oilfields (237 oil producing facilities), 193 deposits of natural gas (219 natural gas producing facilities), and 55 condensate pools (64 facilities). The reserves of petroleum and natural gas in the country are expected to deplete in 70 and 75 years, respectively. At the current moment, raw hydrocarbons development is being carried out at 273 facilities. Of them, production is being carried out at 80 facilities, exploration at 77 facilities, and combined exploration and production at 116 facilities.
627 million tonnes of oil (a 4 times increase), 234 billion m3 of natural gas dissoluted in oil (a 12 times increase), and 49.8 million tonnes of gas condensate was produced in 1996–2009. Over this period, the increase in petroleum reserves was 1,731.9 million tonnes, of gas 105.9 billion m3, and of gas condensate 169.3 million tonnes. $97,124.8 million (a 44 times growth) was invested in 14 years in production of raw hydrocarbons, including $13,688.7 million (8%) for geological exploration (Table).
Among the largest investors of the sector are NCOC (47%), Karachaganak Petroleum Operating B.V. (10%), Uzenmunaygas Production Branch of JSC KazMunayGas E&P (9%), JSC SNPC-Aktobemunaygas (8%), JSC Mangistaumunaygas (7%), LLC Tengizchevroil (4%), Embamunaygas Production Branch of JSC KazMunayGas E&P (3%), JSC Karazhanbasmunay (3%), JSC Mangistaumunaygas (2%), JSC Turgai-Petroleum (2%), LLC JV Zhaikmunay (2%), and others.
Coal: By reserves of coal, Kazakhstan ranks eighth in the world. The state balance sheet records for reserves of 47 various coal deposits, provinces and fields and 200 areas defined as independent facilities (mine fields, open-pit coal mines, and coal strip mines). 85% of coal reserves in the country are represented by steam coal. Only one third of the reserves are involved in commercial production. The coal reserves in the country are expected to deplete in 100 years. Today, coal production is being carried out at 45 facilities. Of them, production is being carried out at 35 facilities and combined exploration and production at 10 facilities.
From 1996 to 2009, 998.1 million tonnes were produced in Kazakhstan (the output increased by 238.1 million tonnes, or by 1.5 times). Concerning the aggregate amount of investments, it came to $5,791.1 million increasing by nine times. Of this amount, less than $12.8 million (1%) was spent for geological exploration (Table). Based on the 2009 year results, among the largest investors are Coal Administration of JSC ArcelorMittal Тemirtau (41%), JSC Euroasian Energy Corporation (20%), LLC Bogatyr Komir (13%), JSC Shubarkol Komir (5%), LLC Angrensor (5%), LLC Kazakhmys Corporation (5%), LLC Karazhyra Ltd. (4%), LLC Maikuben-West (2%), and others.
Uranium: By proved reserves of uranium, Kazakhstan ranks second in the world (31% of the world’s resources), providing 17% of the world’s output. The reserves of 54 uranium deposits are recorded in the state balance sheet. 40% of the uranium reserves are involved in production. The uranium reserves in the country are expected to deplete in 100 years. As of January 1, 2010, the production of uranium was carried out at 24 facilities. Of them, the uranium deposits development was being carried out at 13 facilities, exploration at one facility, and combined exploration and production at 10 facilities.
In 1996–2009, the republic produced 54.9 thousand tonnes (the growth rate of over 100 times), while the growth of reserves reached 82.1 thousand tonnes. The total investments reached $955.6 million (increased by 44 times), including $79.4 million (8%), directed for geological exploration (Table). The biggest investors in 2009 were NAC Kazatomprom (62%), JV KATKO LTD (24%), JV Inkay Ltd (9%), and others.
Gold: In Kazakhstan gold reserves reach over 3% of the world’s proved reserves. At the same time, our republic provides 2% of the world’s supply of this metal. The state balance considers the reserves in 293 deposits, 97% of which are primary deposits. Almost 80% of them are involved in industrial development. The industry resources will deplete in 50 years. At the moment, subsurface development of gold is conducted at 137 deposits, while the production, exploration and combined exploration and production are conducted at 36, 37 and 64 deposits, respectively.
In 1996-2009 Kazakhstan produced 367.1 tonnes of gold (the output tripled, considering concurrent extraction from polimetallic deposits). At the same time, the growth of reserves reached 741.2 tonnes.
The total investments in this period reached $3,159 million (increased by 7 times), including $355.4 for geological exploration. It has to be mentioned that in 1996 the investments in geological exploration was 50% of the total capital investments in the subsurface production of gold while in 2009 only 5% was spent for exploration (Table). About 90% of last year’s investments were supplied by big companies, including JSC JV Vasilkovskoe Zoloto (54%), JSC Varvarinskoe (11%), JSC Financial Investment Corporation Alel (10%), JSC GMK Kazakhaltyn (10%), Metal Trading Ltd (3%), and others.
Copper: The republic holds 6% of the world’s proved copper reserves and 4% of its total output. The state balance considers the reserves of 100 deposits, nearly half of which are copper porphyritic, 25% are cupriferous sandstone, while the remaining deposits are sulphur. 52% of them are being developed at the moment. As of January 1, 2010 the subsurface development of copper was conducted at 33 deposits, while the production, exploration and combined exploration and production were conducted at 15, 7 and 11 deposits respectively.
From 1996 to 2009 Kazakhstan produced 6.6 million tonnes of copper (the total output almost doubled), while the growth of reserves reached 5.1 million tonnes. The total investments in this period reached $4,142.6 million (more than doubled), including $65.4 million (2%) for geological exploration (Table). Almost 100% of capital investment was supplied by two big companies – Kazakhmys Corporation Ltd (86%) and Copper Technology Ltd (12%).
Polimetals (lead, zinc):Kazakhstan holds 10% of the world’s lead reserves and 8% of the world’s zinc reserves, supplying 3% and 6%, respectively, of the global production of these metals. The state balance considers the reserves at 82 deposits of lead and 87 deposits of zinc. At the same time, the industrial development involves 47% of lead reserves and 67% of zinc reserves. The industry resources are expected to deplete in 25 years. Today, the mineral production of poliymetals is conducted at 31 deposits, while the production, exploration and combined production and exploration are conducted at 17, 3 and 11 deposits respectively.
From 1996 to 2009 Kazakhstan produced 1.4 million tonnes of lead and 6.4 million tonnes of zinc (the output has doubled). The growth of reserves reached 0.6 million tonnes and 1.9 million tonnes, respectively. The total investments in polimetals production in this period was $5,600.9 million (more than doubled), and $60.7 million of it (1%) was spent for geological exploration (Table). Nearly the entire amount of investments was supplied by such big companies as Kazzinc Ltd (60%), Kazakhmys Corporation Ltd (30%), JSC Shaymerden (6%), and Nova-Zinc Ltd (4%).
Bauxites: Kazakhstan has 1% of the world’s proved bauxite reserves. The share of Kazakhstan in its global production is 2%. The state balance includes the reserves at 24 deposits, 52% of which are involved in development. The bauxite reserves in the republic will deplete in 50 years. As of January 2010, the subsurface development of bauxites was conducted at 5 deposits, while the production and exploration were conducted at 4 and 1 deposits, respectively.
Since 1996 Kazakhstan has produced 57.6 million tonnes of bauxites (the output volume nearly doubled), while the growth of reserves has reached 0.7 million tonnes. In the last 14 years the total investments reached $874.6 million (a 400% growth), including $9.2 million (1%), spent for geological exploration (Table). The entire amount of investments in 2009 was provided by Krasnooktyabr Bauxite Mine Group (87%) and Torgay Bauxite Mine Group (13%); both are part of JSC Aluminium of Kazakhstan, the industry’s monopoly.
Iron, Manganese:The share of Kazakhstan in the total world’s reserves of iron is 6% while the republic also holds 18% of manganese reserves, supplying 2% and 5% of their global output. The state balance includes the reserves at 56 deposits of iron and 34 deposits of manganese. The industrial development involves over half of iron deposits and 73% of manganese deposits. The manganese reserves will deplete in 50 years while the iron reserves in 100 years. Today, the production of iron and manganese is conducted at 44 deposits; of them production, exploration and combined exploration and production are conducted at 44, 19 and 6 deposits, respectively.
From 1996 to 2009, Kazakhstan produced 466.1 million tonnes of iron and 26.8 million tonnes of manganese (the iron output doubled and the manganese production increased by 400%). The growth of reserves on them reached 1,616.4 million tonnes and 40.1 million tonnes, respectively. The total investments in this period reached $4,521 million (a 300% growth), including $52.8 million (3%), spent for geological exploration (Table). In 2009, 99% of investments were supplied by JSC SSGPO (70%), JSC Zhayrem GOK (10%), Orken Ltd (10%), JSC TNC Kazchrome (3%), KARUAN Ltd (2%), and others.
Chromites:Kazakhstan ranks 1st in the world by the chromite reserves and supplies 15% of its global output. The state balance includes the reserves on 20 deposits, 91% of which are being developed. The resources of the chromites industry will deplete in 90 years. As of January 1, 2010, the production of chromites was carried out at 10 deposits, while the production and exploration were conducted at 9 and 1 deposit, respectively.
From 1996 to 2009 Kazakhstan produced 43.8 million tonnes (a 700% growth). In this period the growth of reserves reached 1 million tonnes. The total investments in chromites production reached $1,824.4 million (a 900% growth) while only $23.6 million of which was spent for geological exploration (Table). The biggest investors last year were JSC TNC Kazchrome (70%) and Voskhod-Oriel Ltd (30%).
In order to simplify the procedures of state regulation in the area of mineral production the legislation is constantly improved with consideration of the interests of the state and subsurface users, as well as the establishment of a transparent system of relations between them. At the moment, the new draft law On subsurface and subsurface use is discussed at the Senate of the Parliament of the Republic of Kazakhstan. The new law aims to combine the current same name law and the Law on Oil. The major conceptual legislative amendments include the following:
· The abrogation of the contracts of combined exploration and production of mineral resources;
· The limitation of exploratory operations term to 6 years with no prolongation.
· The defining criteria for the winner of the tender or participant of direct negotiations are reduced to two (the amount of subscription bonus and the amount of deductions to the local budget for the socio-economic development of the region and the development of its infrastructure).
· The basis for operations on subsurface use will be the project documentation.
· The share of local content in every certain contract will be in the contract itself.
According to the draft law the early termination of the contract, initiated by competent authority, will be processed in the following cases: 1) Two cases of violation of the contract terms are recorded and they are not corrected); 2) Failure to observe by the subsurface users the preemptive right of the government to acquire the mineral production rights; 3) By resolution of the Government of the Republic of Kazakhstan in case the mineral production operations at strategically important deposits threaten national security. At the same time, considering the interests of the mineral producers, the draft law assumes an extrajudicial procedure for resuming the contract.
In order to effectively manage information flows, ensure long term storage of information about subsurface and automation of processes, the Geology and Subsurface Use Committee created and is working on the National Subsurface Database (NSD), based on a specific database and modern IT equipment. NSD processes automated collection, accounting, accumulation, processing, analysis and use of information about subsurface and mineral resources of Kazakhstan. The state users will get NSD information through a single transport area system of electronic government.
Also, the authorities established a National Oil and Gas Database (NOGD), which is an automated database, containing geological and geophysical data, based on modern archivation equipment of IBM and Landmark-Halliburton software. The major advantage of the system is the expansion of interpretation capacity thanks to prompt access to all data about seismic surveys and drillhole surveys on the oil and gas bearing regions of the republic.