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Tselingrad Rudny Aqmola from Space
Kazakhstan South Turgai basin 7 MMcfd 440 b/d
Major Oil/Gas Projects april 2005
Caspian Holdings identifies 7 new wells in Zhengeldy fields
KazTransGas: Stability, Reliability and Prospects.
Kazakhstan Rail In Russian 
Amangeldy gas field: Readiness
Development of new gas field
Amangeldy Gas Production Train Starts Operations 
ExxonMobil Kazakhstan  in 2 North Caspian Discoveries
ADB extends credit facilities to Kazakhstan 
Confronting Kazakhstan's 'Dutch Disease'
Kazatomprom inaugurates new refining plant 
Kazakhstan Oil Ownership
President helps launch a new zinc plant 
Oil Gas News
The cultural geography of Central Asian energy 
Geo-economics and energy development in Central Asia
Dec 2003
Kazakhstan has significant oil and gas reserves, and with the recent opening of the Tengiz-Novorossiisk oil pipeline, the country is beginning to realize some of its enormous export potential. With predictions of up to 10 billion barrels of recoverable oil in the Kashagan offshore oilfield, Kazakhstan could become one of the world's major oil producers in the next decade.
March 2011

Kashagan D

Kazakhstan’s Black Gold Mines
World 0il FEBRUARY 2011
The Caspian Sea is the world’s largest freshwater lake, depending on your definition of “lake.” If you take the commonly accepted “body of (usually fresh) water surrounded by land,” then the Caspian qualifies. The water is “fresh” only in a sense, though. Salinity varies greatly from north to south, from very low where the Caspian is fed by the Volga and many other smaller rivers, to near-ocean salinity in the south where it borders on Iran. The Garabogazkol embayment, that little bump that sticks out on the eastern side (see photo) is salty indeed, about 10 times as much as seawater.
If you call the Caspian a sea, with its 143,000 sq mi of water surface, nobody is going to argue with you. It is divided into three distinct regions: the south, which has deep waters (sometimes exceeding 3,000 ft), the middle region, with an average depth of about 600 ft, and the North Caspian, which is essentially a very, very large puddle. As you can tell from the satellite photo, the area is quite shallow (only 15 to 20 ft deep). Many times in its history it has dried up completely, leaving a layer of evaporite like the Bonneville salt flats in Utah.

Too hot, too cold. It is not a terribly pleasant place. Although it sits at a latitude comparable to the French Riviera, it is far from a temperate climate. Bounded by deserts and swampy wetlands, below sea level, the North Caspian is hot and humid in the summer, with legendary (and malaria-carrying) mosquitoes, and in the winter it freezes solid.
Not to get all James Michener on you, but the geological history of the area is important. For most of its existence, going back to the ancient days of Gwandonaland, the region has been a shallow continental sea. Marine organisms by the billions and trillions have lived and died and dropped to the bottom to be buried in silt. These formed large sedimentary basins, and that’s what makes the region interesting, from an international energy perspective.

The North Caspian lies within the nation of Kazakhstan, a vast country that sits on the imaginary dividing line between Eastern Europe and Central Asia. The ancient land that became Kazakh has been continually inhabited for thousands of years. Following its conquest by the Russian empire in the 19th century, it became the place where people were sent involuntarily, both as exiles and as colonists, a practice that continued into the Soviet era. Hence, the modern Kazakhs are a hardy people with wide cultural diversity.

In the time of the Czars, the country was known for its coal resources. In 1979, while still part of the Soviet sphere, the first major oil discovery was made on the wetlands of the North Caspian. Tengiz Field, with some 25 billion bbl of oil in place, was the sixth largest oil field in the world. Although the oil is abundant, it is also high in sulfur, and the removal and handling of this contaminant has been particularly challenging. Tengix also holds a considerable amount of natural gas, though it is very sour, with lethal levels of hydrogen sulfide. Soviet efforts to develop the field were mostly haphazard. The first exploratory well to hit serious paydirt in 1986 resulted in a gas blowout that was so difficult to handle, at such tremendous pressure and with high levels of poison gas, that it burned for over a year before finally being extinguished and capped by Red Adair.
After Kazakhstan gained its independence in 1991, interest in petroleum exploration heated up. The new nation sought out foreign help, and after three years of negotiation, the Kazakh government signed a PSA with Chevron subsidiary Tengizchevroil to invest some $30 billion over four decades. At first, the government controlled 50% of the project, but with the desperate economic conditions that Kazakhstan found itself in during the early ‘90s, they were compelled to sell of most of their stake to foreign companies. This was a humbling lesson they never forgot.

In 2000, Kashagan Field was discovered, with estimated commercial reserves ranging from 9 billion to 16 billion bbl. Located in the central North Caspian, it is actually five fields, Kashagan, Kalamkas A, Kashagan SW, Aktote and Kairan. The find has the potential to make Kazakhstan a heavyweight oil exporter, but its development has been stymied by production delays and budget overruns. Kashagan has not yet produced a commercial barrel of oil.
To develop the field, the Agip KCO consortium was created, consisting of Eni, ExxonMobil, Royal Dutch Shell, Total, ConocoPhillips, Inpex and KazMunaiGaz, the national oil company.
The start date for Kashagan production was pushed back repeatedly, from 2005 to 2008, then 2010. The Kazakh government accused the consortium of breach of contract and violating environmental regulations. It revoked Eni’s operating license, and demanded a $40 billion bonus and an increased share in Kashagan. It also threatened to fine the consortium for environmental damage. Project costs increased from $57 billion to $136 billion. A new joint operating company, North Caspian Operating Co. (NCOC), became operator. First production was pushed back to late 2012 (and not everyone believes that). NCOC announced that Phase II development would be delayed until 2018. The plan is to boost production to 1.5 million bpd by 2021, but that date is also in doubt.
The government’s heavy-handed dealing with NCOC has led some observers to speculate on the possibility of a Putinstyle takeover. But despite all the suspicion and ill will on both sides, there is a lot at stake for both Kazakhstan and the companies. With all the challenges on the big lake, they need each other. WO
Kazakhstan South Turgai basin 7 MMcfd and 440 b/d
By OGJ editors HOUSTON, Aug. 31 2006 -- Romania's state Petrom told shareholders it is evaluating the size and commerciality of a gas-condensate discovery on the Dzhusaly exploration license in the South Turgai basin.

The South Rovnaya-1 exploration well went to TD 2,000 m, and first test rates were 7 MMcfd and 440 b/d from an undisclosed formation.
Caspian Holdings identifies 7 new wells in Zhengeldy fields
November 29, 2004 -

Caspian Holdings PLC said it has identified seven new wells at the Zhengeldy oil field, onshore from the Caspian Sea in Kazakhstan, to be drilled, following further extensive geological reviews.

The first three wells should be drilled on schedule by the end of 2004, with the next four wells to be completed in the first quarter of 2005.

Of the seven wells, three are located in Jurassic levels and four are located in Triassic/Jurassic levels. The first well was successfully drilled to a target depth of 600 metre and logs show two oil bearing levels with clean sands in the Jurassic.

Well number 114 will be perforated and completed this week and Caspian will commence drilling well number 112.

Executive chairman Michael Masterman said: "Drilling results from the first of seven wells has shown two oil bearing levels in the Jurassic making us confident about the results of the next six wells.

"This drilling should bring us closer to achieving our goal of increasing targeted daily production to 4300 bbls by the end of 2005."
Caspian Holdings PLC said it has identified seven new wells at the Zhengeldy oil field, onshore from the Caspian Sea in Kazakhstan, to be drilled, following further extensive geological reviews.

The first three wells should be drilled on schedule by the end of 2004, with the next four wells to be completed in the first quarter of 2005.

Of the seven wells, three are located in Jurassic levels and four are located in Triassic/Jurassic levels. The first well was successfully drilled to a target depth of 600 metre and logs show two oil bearing levels with clean sands in the Jurassic.

Well number 114 will be perforated and completed this week and Caspian will commence drilling well number 112.

Executive chairman Michael Masterman said: "Drilling results from the first of seven wells has shown two oil bearing levels in the Jurassic making us confident about the results of the next six wells.

"This drilling should bring us closer to achieving our goal of increasing targeted daily production to 4300 bbls by the end of 2005."


Kazakhstan has the Caspian Sea region's largest recoverable crude oil reserves, and accounts for approximately two-thirds of the roughly 1.5 million barrels per day (bbl/d) currently being produced in the region (including regional oil producers Kazakhstan, Azerbaijan, and Turkmenistan). Accordingly, Kazakhstan has Central Asia's largest economy. Kazakhstan's real gross domestic product (GDP) grew by 9.5% in 2002, to $24.5 billion, resulting in a per capita GDP of $1,640 (roughly comparable to Guatemala and Ecuador). This marked only the third consecutive year of significant economic growth in Kazakhstan since independence.

Economic growth in recent years has been propelled by Kazakhstan's growing petroleum industry, and as a result, the state's budget revenue is roughly 55% dependent on the oil sector. Several economic research efforts conducted in 2002 and 2003 highlighted the growing danger of possible over-reliance on the oil sector, with some analysts predicting that without more investment into the country's non-oil sectors, Kazakhstan's economic capacity will be strained by 2007, thus stifling growth in the next decade. In an effort to reduce Kazakhstan's exposure to price fluctuations for energy and commodities exports, the government has created the National Fund of Kazakhstan. As of June 2003, the National Fund held $2.3 billion.

Foreign investment continues to pour into Kazakhstan's potentially enormous oil and gas sector. The country has received $10 billion in foreign investment since independence in late 1991, including slightly over $1 billion in 2000. In January 2001, President Nazarbayev issued a decree establishing the National Fund to make the country less exposed to changing prices for energy and commodities exports. The National Fund, which received $660 million from U.S. oil major Chevron in exchange for Kazakhstan's 5% stake in a joint venture at the giant Tengiz oil field, will be replenished with extra budget revenues, taxes from oil companies, and signing bonuses and royalties paid by foreign partners in joint ventures. In February 2001, Kazakh Economy Minister Zhaksibek Kulekeyev announced that the resource-rich Central Asian state planned to attract $65-70 billion to its promising oil and gas sector over the next decade.

 Kazakhstan is the second largest oil producer among former Soviet republics after Russia, with output of 693,000 bbl/d in 2000. Almost half of Kazakh oil production comes from three large onshore fields: Tengiz, Uzen, and Karachaganak. Kazakhstan has been eager to tap its production potential of over 3 million bbl/d, and former Prime Minister Nurlan Balgimbayev (now the head of Kazakhoil) has estimated that Kazakhstan could earn $700 billion in revenues (including taxes) from offshore oil and gas fields over the next 40 years.

Kazakhstan sits astride the northeast portion of the Caspian Sea and claims most of the Sea's biggest known oil fields. Kazakhstan's combined onshore and offshore proven hydrocarbon reserves have been estimated to be between 9 and 17.6 billion barrels (comparable to OPEC members Algeria on the low end and Qatar on the high end). Although only a minor world oil exporter in 2002, Kazakhstan is poised to become a more significant player in world oil markets over the next decade.

Kazakhstan produced approximately 939,000 barrels per day (bbl/d) of total liquids in 2002 and consumed only 140,000 bbl/d, resulting in net exports of
799,000 bbl/d. Markets for exported Kazakhstani oil are growing rapidly, with oil being delivered to world markets through the Black Sea (via Russia) and the Persian Gulf (via swaps with Iran), as well as some additional traffic northward to Russia via pipeline and rail.

In order to develop its production, Kazakhstan has opened its resources to development by foreign companies. International oil projects have taken the form of joint ventures, production sharing agreements (PSAs), and exploration/field concessions. By far, the largest of these is the Tengizchevroil joint venture. In April 1993, Chevron concluded the $20-billion Tengizchevroil joint venture to develop the Tengiz oil field, with 6 to 9 billion barrels of estimated oil reserves. The Tengizchevroil joint venture produced 190,000 bbl/d in 1999, and production could increase to 340,000 bbl/d by 2002. Given adequate export outlets, the Tengizchevroil joint venture could reach peak production of 750,000 bbl/d by 2010.

President helps launch a new zinc plant 
On October 27, president Nazarbayev took part in the launching ceremony of a new zinc plant in Balkhash town, Karagandinskaya oblast. The plant is owned and will be operated by Kazakhmys, one of Kazakhstan’s major corporations. Kazakhmys is the ninth largest copper producer and the fourth largest silver producer worldwide. The cost of the plant is approximately usd 120 million. The plant is expected to produce 40,000 tons of zinc in 2004, and to raise production to 100,000 tons of zinc by 2006.(Interfax - Kazakhstan, October 28 03)

ADB extends credit facilities to Kazakhstan 
The Asian development bank (ADB) has planned a usd 190 million lending program to Kazakhstan in 2004-2006,according to the country strategic program for 2004-2006.The ADB announces it has four credits planned for this period to be spent on rural water supply, natural resource management and highway reconstruction. The ADB urged the government of Kazakhstan to take advantage of its strong, oil-fueled growth (approximated at 12% annually over the past three years) in order to more aggressively combat poverty in the republic and to more actively cooperate with other central Asian states. As of 31 December 2002, the ADB has provided a total of usd 467 million to Kazakhstan.(Kazakhstan - newswire, October 28 03)

Kazatomprom inaugurates new refining plant 
On November 7, the national nuclear company Kazatomprom, the fourth largest uranium producer worldwide, started operation of a new refining plant at its "central" mine in southern Kazakhstan. The first production batch will be released by late 2003, according to a Kazatomprom release. The anticipated initial capacity of the new plant is 1,700tons of uranium oxide and protoxide per annum; the plant design capacity is 2,000 tons per annum. Kazatomprom invested usd 4.5 Million of its own funds to construct the facility, which is expected to process half of all uranium extracted by Kazatomprom in southern Kazakhstan. Kazatomprom will send the other half to the Ulbinsk metallurgical plant, in eastern Kazakhstan. (Interfax -Kazakhstan, November 7 03)

Confronting Kazakhstan's 'Dutch Disease'
March 26, 2003 

As the United States is engaging in regime change in Iraq, the political turmoil in the Middle East is driving up the oil prices. Kazakhstan is flush with oil and gas revenues. 
However, without targeted government policy, the long term economic consequences of the hydrocarbon boom may lead to crowding out investment in the non-petroleum sectors and appreciation of the Kazakh currency, the tenge. If President Nazarbaevs administration will continue to preside over increases in income disparities and underdevelopment, it eventually may face political instability due to inflated popular expectations. Kazakhstan has done little to prevent the Dutch disease, despite warnings from  the World Bank. 

According to government statistics, Kazakhstan is boasting an impressive 9.8 percent economic growth rate in 2002. It further expects GDP to grow at annual rates of 6.3-8.6 percent in 2004-2006, with total growth of over  27 percent in the next four years. Whether this ambitious target is achieved depends on volatile energy prices and the quality of national economic  management in Astana.

According to President Nazarbaev, who spoke at the recent Kazakh-Italian business forum in Rome, Kazakhstans projected economic growth for the first quarter of 2003 is 9 percent. Italian investment in Kazakhstan reached $1.3 billion dollars. But this is barely a drop in the ambitious goal of $100 billion in investment funds Nazarbaev wants to attract in the next 10-12 years. Kazakhstan may be interested in working with the Italian state-owned ENI, the operator of Agip-led consortium in the Kazakh sector of Northern Caspian, and of the giant Karachanganak field, to export oil via Iran. If such investments materialize, experts say, they will flow overwhelmingly to the overheated oil and gas sector.

Oil revenues continue to remain in record territory for 2003. Kazakhstan has boosted oil production by 16.6 percent in 2002, to 42 million tons. International oil majors, such as Shell and Hurricane oil have significantly expanded their Kazakhstani holdings.
Natural gas production and downstream production will also grow: Kazakhstan has increased natural gas exports by 13.2 percent, and produced 30 percent more of gas condensate. 

Kazakhstan will be developing Phase Three of the Karachaganak gas condensate field, which will require a $2 billion investment. The Amangeldy field in southern Kazakhstan will be expanded, and ChevronTexaco will open a polyethylene plant in April 2003. 

ExxonMobil is planning to develop a strategic program for Kazakhstan jointly with the Energy Ministry for years 2003-2010. The first iteration of the program will be submitted to the government in the third quarter of this year. 

Kazakhstan is boosting its hard currency and gold reserves, which grew by 9.1 percent to $5.5 billion in January, and further increased the National Fund to $1.933 billion, while gold reserves grew by 14 percent to $627 million, according to the Kazakh Central Bank press release quoted in the February Interfax Central Asian Business Report. The Central Bank said that Tenge money supply tripled, foreign deposits rose by 32.8 percent, and bank deposits increased by 46.2 percent, while lending rose 37 percent in 2002. 

Using growing demand for energy, Kazakhstan announced plans to become the  worlds largest uranium producer by the year 2027. Its national nuclear corporation, Kazatomprom, has increased the ore production from 794,000 tons in 1998 to 2.4 million tons in 2002. As it currently produces only five percent of the global output, the goal to become number one seems excessively ambitious. Kazakhstan has increased uranium production by 34 percent in 2002, and is planning to expand export to China, Japan and Russia. 

Astana is also interested in boosting its coal production from 70 million tons in 2002 to 74 million tons in 2003. The January 2003 figures are higher than January 2002 by 21 percent. 

This natural resources windfall is the strategic window of opportunity for Astana to address four structural defects of its energy-driven economy: corruption; capital flight; a dysfunctional social safety net; and the money-losing nature of the non-extracting sectors of the economy. 

High-level corruption and capital flight may be the most difficult to resolve. 
Most  often perpetrated, or aided and abetted, by top government officials, it is a net  loss to the people of Kazakhstan. Police measures are in themselves not effective, as law enforcement is corrupt and controlled by the perpetrators. The fish is rotting from its head. The government is unlikely to crack down on organized crime and corruption which plague the economy. As long as the government is not prosecuting the most odious exporters of capital, even if they are politically connected insiders, the local economy will remain too  inhospitable and bureaucracies too corrupt to make investment in non-energy sector attractive. 

Second, it is the time for the Kazakhstani government to bring internal energy prices, including natural gas and coal, to world levels. Todays high oil prices will allow to provide subsidies to retired or laid off workers, while closing down inefficient, energy-guzzling enterprises and hiking railroad tariffs. Energy can be exported to increase revenue. Some of the workers in remote company towns can be relocated to more livable venues.

Third, social sector reform is long overdue. While salaries are higher in the energy sector by a factor of at least two in Kazakhstan, most of the gigantic profits are not invested back home to create jobs outside of the oil and gas sector, nor are tax proceeds efficiently distributed to support the elderly, sick and poor. 

The Kazakh government can battle the Dutch disease by stimulating non-energy business development and job creation, by simplifying registration for new business and reducing corporate taxes and employment payments for these newly created entities. As USAID and a number of NGOs repeatedly demonstrated around the world, micro-lending to boost  entrepreneurship is yet another way to decrease unemployment and poverty.

In addition, some of the structural unemployment 20 percent in Kazakhstan, even higher in energy-poor Kyrgyzstan and Tajikistan can be alleviated by opening the doors of the oil and gas sectors to workers from the areas hit with particularly high unemployment. This can be achieved by loosening severe interior ministry residence registration rules, which are a hick-up of the old Soviet era propiska system, and by providing better living conditions in the company towns owned by the extracting industries. As World Bank Vice President Johannes F. Linn has suggested recently, regional cooperation is likely to alleviate some of the structural asymmetries and stimulate growth. Clearly, cooperation on water utilization, pipelines, transport, and commerce is the most logical.

Unequal income distribution in Kazakhstan, where average salary is barely over $1,000 a year, (and even more so in Kyrgyzstan and Tajikistan with only $200-$300 per capita incomes), may lead to economic dislocation, social conflict, and uncontrolled migration. Kazakhstani leaders were forewarned. Both Astana and international financial institutions should address these disparities while the energy bonanza lasts. 

AUTHORS BIO: Ariel Cohen, Ph.D., is Research Fellow in Russian and Eurasian Studies at the Heritage Foundation and author, with Gerald P. ODriscoll, of The    Road to Economic Prosperity for Post-Saddam Iraq (2003). His expertise includes international energy security. This piece was originally published on the Central Asia-Caucasus Institute  website.

Geo-economics and energy development in Central Asia
 By Dr Robert M. Cutler   24-04-01

The opening, or at least the beginning of the filling, of the oil pipeline of the Caspian Pipeline Consortium (CPC), from the Tengiz field in northwest Kazakhstan to  Novorossiisk on the Russian Black Sea coast, received deserved if extended -- indeed sensational -- publicity several weeks ago.   The CPC line is, after all, the first new pipeline to be built from the Caspian region since the demise of the Soviet Union. The pumping of oil into the pipeline began belatedly, but it is now expected that the first tanker will be filled in Novorossiisk in June. 

Yet all the attention paid to western Kazakhstan makes it difficult for most observers to gain an understanding of the overall energy balance in Central Asia. For example,  sight is often lost of Uzbekistan's regional role as an energy producer because of its two better-endowed neighbours, Kazakhstan and Turkmenistan. Yet as explained  below, Turkmenistan does not really come into play although it is certainly a regional actor; rather, Kazakhstan and Uzbekistan are the main players on the scene.
This article calls attention to overlooked aspects of the Central Asian energy balance, with special attention paid to Kazakhstan and Uzbekistan and the contrasts between  them and the significance of those contrasts. 

 1. The Caspian? Don't look where they're pointing 
One recent development widely noted was Kazakhstani President Nursultan Nazarbayev's statement of commitment -- in a Memorandum of Understanding  signed last month with Turkey, Georgia and Azerbaijan -- to pump Kazakhstani crude into the planned Baku-Tbilisi-Ceyhan (BTC) pipeline. (The crude may  come from the offshore Vostochny Kashagan field, which is still to be developed.)

However, other developments in the Kazakhstani energy sector have  attracted less notice.
Even though these developments are more modest than the CPC and BTC projects, their potential effects are no less wide-ranging.   For example, disputes between Kazakhstan and China over the management and development of the Aktobemunaigaz (AMG) and Uzenmunaigaz (UMG)  complexes have continued. As a result, it appears that plans to build a pipeline from western Kazakhstan into western China have been shelved, even  though those plans were in fact an integral part of the contract that the Chinese National Petroleum Company (CNPC) signed to acquire AMG and UMG  assets. Some of the oil produced by these two companies is taken by rail to the border between the two countries and then loaded for transport into China,  but this is a money-losing operation that Beijing is subsidizing only to keep its hand in the game. 

The game may not go on much longer.
Towards the end of last month, a senior CNPC official was quoted as saying that the pipeline from Kazakhstan to China will not be built in the near future and that whether it was built at all would depend on the size of the hydrocarbon reserves found in the region.

Meanwhile, Kazakhstan's state oil pipeline operator KazTransOil announced that it has established another route for oil from the region. 
Like Tengiz oil,  AMG oil has high concentrations of sulphur compounds that require dedicated pipelines and make the use of shared pipelines impossible. Until very  recently, the crude was confined to a special pipeline from the Zhanazhol field to Russia's refinery in Orsk. But a "sweetening" refinery was put into  operation earlier this year at the Bestamak oil-loading rail terminal, the product of which goes to the Atyrau refinery for subsequent pumping into the  Atyrau-Samara pipeline and delivery to Black Sea ports. 

In addition, according to KazTransOil, AMG crude will now also be delivered through the oil-loading rack at Bestamak to the port of Aktau and then taken by  tanker to Makhachkala (in Dagestan) for pumping into the Makhachkala-Tikhoretsk-Novorossiisk pipeline. 

 2. Uzbekistan's regional energy lever 
Another neglected but important event is Kazakhstan's recently announced decision to develop the Amangeldy gas field in the south of the country. The  significance of this decision is that Uzbekistan's influence in Central Asia will diminish still further as Kazakhstan continues to be the motor not only of  multilateral diplomacy but also of energy development. 

The Amangeldy field is planned to supply customers in southern Kazakhstan, where current demand for roughly 1.5 bn cmpy of gas is satisfied by imports  from Uzbekistan. Amangeldy and the adjacent Airykty deposits are estimated to contain reserves of 22 to 25 bn cm and could provide southern Kazakhstan  with 600 mm cmpy of gas beginning in 2003. 

Although Uzbekistani energy resources are often overlooked in the focus on Turkmenistani gas and Kazakhstani oil, Uzbekistan has in recent years -- indeed  in recent months -- used its gas as a political lever against other countries in the region. In particular, Tashkent has successfully used gas for leverage in  seeking short-term economic fixes for its dire domestic situation. 
For example, Uzbekistan last fall agreed to deliver 850 mm cm of gas to southern Kazakhstan at a concessionary price of $ 40 per 1,000 cm in exchange for  the reconnection of telephone lines with Kazakhstan and the right to have its trains pass through Kazakhstan. It obtained this agreement even though it  owes a $ 4 mm debt to Kaztelekom and rail-transit debts of $ 2 mm. 

So it seems that Russia is not the only state in Central Eurasia that uses energy supplies and pipelines for political arm-twisting; it just is more able to do so  than most others. Uzbekistan too is using its gas supplies for leverage against its neighbours. Meanwhile, Tashkent's version of "Realpolitik" arm-twisting is  fuelling the growing perception in Central Asia that Uzbekistan is seeking to become a regional hegemony. 

As such, antipathy to Tashkent is on the rise in the region. For example, Uzbekistan made territorial demands on Kyrgyzstan last year concerning the ethnic  Uzbek enclave of Sokh while engaging in a temporary suspension of gas exports to Kyrgyzstan as winter was beginning.To make up for the gas shortages,  Kyrgyzstan increased output at its hydro-electric power plants, a move that diminished water levels in reservoirs on which Uzbekistan draws to irrigate  spring planting. This side-effect then led Uzbekistan to renounce its territorial claims and assert its adherence to international legal norms for the resolution  territorial disputes. 

The issue was especially sensitive since Uzbekistani troops in had the past violated Kyrgyzstan's sovereignty by holding military exercises on its territory  without first asking permission. (Ethnic Uzbeks account for one seventh of Kyrgyzstan's population, and Uzbekistan is the predominant power in southern  Kyrgyzstan, which is linked to the northern part of the country only by air.) 

The cultural geography of Central Asian energy 
There is a reason why in the Soviet era the five republics we now call "Central Asia" were called, in Russia, "Kazakhstan and Middle Asia." The  demography and especially the topography of Kazakhstanare split between those of Central Asia and those of southern Siberia. This split is becoming all  the more evident as centrifugal forces threaten to tear the country apart. 

The economic life of the western part of the country, especially the northwest (and as typified by energy pipeline flows), is becoming more closely linked  with the West via trans-Caspian trade and communications flows. Likewise, western Kazakhstan's links with the South Caucasus, which is geographically  part of Europe (a fact that the European Union has recently recognized publicly), are increasingly direct. The north and northeast sections of the country,  meanwhile, remain connected to southern Siberia also through trade in raw materials. And the south is economically and even culturally separate from  both of the other sections. 

By contrast, Uzbekistan, because of its geographic situation, does not suffer so much from those types of problems. Indeed, Uzbekistan's  "periphery-periphery" problems are of a wholly different sort. Simply put, the population is exploding most rapidly in areas where jobs are least likely to be  created, even if the entire system became more receptive to foreign direct investment overnight. Five of the eight most densely populated provinces in the  former Soviet area are in Uzbekistan. (Besides the region in which the capital Tashkent is located, these are Andijan, Ferghana, Namangan and Khorezm.)
Yet, Uzbekistan is perhaps the most Central Asian of all five countries in the region. It is, for example, the one most affected by incursions of Islamic militants  based in Kyrgyzstan and supported by Afghanistan. Yet none of the geopolitical questions most pressing to Tashkent are directly energy-related. They might  be easier to handle if they were. 

For the sake of completeness, mention must also be made of Turkmenistan, which, with a population of close to 5 mm, is more easily held under the iron  grip of President Saparmurad Niyazov. He experiences no political "periphery-periphery" problem simply becausethe opportunities for social mobilization of  popular discontent have much less chance of reaching critical mass. For his development strategy, Niyazov had hoped to be able to export part of his  country's huge gas reserves to India by way of Pakistan, but for that an export pipeline would have to traverse Afghanistan. 

The lack of international recognition of the Taleban regime in Kabul has made financing for such a pipeline impossible to find. Meanwhile, Niyazov also has  unrealised dreams of a pipeline to China. However, as it now stands, Turkmenistan's pipelines mainly feed Russia by way of Uzbekistan.   Thus Turkmenistan is not really a player in the energy balance of Central Asia proper. With its distinctive history and ongoing "Turkmenisation" of the  national culture, it stands apart from both Kazakhstan and Uzbekistan (although it is in conflict with the latter over border demarcation and related issues).  So Uzbekistan is more clearly Central Asian than Kazakhstan, and Turkmenistan's profile verges at times on being South Asian. But Kazakhstan is Russian,  European and Asian all at the same time. 

4. Conclusion: Development in Uzbekistan and Kazakhstan contrasted 
The contrast between Kazakhstan's success in developing its energy resources and Uzbekistan's failure to develop its own can be traced back to 1994, when  Uzbekistan (now sinking ever deeper into the mire of economic stagnation), imposed currency-exchange restrictions in an effort to protect the national  economy during a year when the cotton crop was disastrous. Those restrictions were never lifted, and they have choked the country's development to this  day. The controls are quite severe and make for a very discouraging foreign-investment environment. 

Recent reports from Uzbekistan to the effect that the country's banking system has made some progress on the reform front are belied by the more recent  decision by the International Monetary Fund (IMF) not to replace its resident representative because of the failure to reform the exchange-rate system. The  IMF has not provided assistance to Tashkent for some time but had maintained a mission there in order to facilitate communication between the two sides.  Meanwhile, other reports suggest that the World Bank will reduce the value of its next three-year lending program in the country to an extremely modest 150 mm.

By contrast, Kazakhstan accepted basically all recommendations made to it by the IMF throughout the 1990s.
The country completed its banking system  reform program and is set to experience real economic growth, notwithstanding the immiseration of significant segments of the population. The two clouds  on the horizon for Kazakhstan are illegal immigration and domestic migration on the one hand, and, on the other hand, militant Islamic fundamentalism.  Kazakhstan in general and Almaty in particular are actually a pole of attraction for economic refugees from other countries in the region. 

Indeed, Kazakhstan is relatively stable, and it is actually possible to make a living in the capital. For this reason, internal population shifts are also occurring  because of the absence of work in towns and villages throughout the country. The threat from militant fundamentalism -- and this will probably be the first  year that it actually manifests in Kazakhstan -- comes mainly in the south of the country. That is why moves towards energy self- sufficiency in Kazakhstan,  especially in that part of the country to be supplied by the Amangeldy field, are potentially so significant. 

Robert M. Cutler was educated at the Massachusetts Institute of Technology and the University of Michigan and holds a Ph.D. in political science. He has worked in European and Eurasian affairs for 20  years, specializing in Euro-Caspian and post-Soviet energy. His management specialties include organizational analysis and design and organizational learning under complex systems of information and  cross-cultural communication.   Source: NewsBase

KazTransGas: Stability, Reliability and Prospects.
[13.03.2003] By Alevtina Donskikh

Three years have passed off after KazTransGas Co. was given functions of the national operator, wholesale purchaser and seller of gas. The Government made this decision to provide gas supply to all remote regions and bring to order import-export flows. As gas production was rising, it became necessary to concentrate entire  management of the branch in the hands of the Government.

 In future gas production will amount to 75bn cubic meters a year against 10bn in 2001-2002. 

Needs of our economy demanded this step too. Specialists forecast demand of RK economy may rise up to 15-16bn m3 by 2010.

A strict term of establishment of KazTransGas was also construction of local distributing networks to supply gas to consumers, establishment of distributing companies, whose principal functions would be gas supply and collection of payments. 

Today we can already consider advisability of this decision. Experts think return to state regulation afforded to lead the branch from impasse and overcome negative aftereffects of the USSR collapse. Those changes were to make the branch a manageable and stably working economy. 

The work was implemented in few stages according to special strategy. In the late 2000 KazTransGas purchased RK gas 
transport business from Belgian Tractebel C.A. This was an important step demanding big capitals to reanimate pipelines, which were badly destroyed.

Capability of main gas pipeline the Middle Asia - Center (MAC), being the shortest international rout for Turkmenian and Uzbek gas through Kazakhstan to Russia and Western Europe, was some 30bn m3 a year. 3939 km of the pipeline are situated in Kazakhstan; total length is 9155 km. Electrolytic protection at lines was badly disturbed and protection of underground lines was less than 70 per cent. Hundreds of km of operating gas lines were disconnected from the general system; gas-pumping units were not repaired. Therefore the company allotted over 230mn USD for repair in 2001-2002. 

Now protection of the pipes and underground lines is completely restored. 29 gas-pumping units are repaired. The company is ready to launch a pumping unit at pipelines Orenburg-Novopskov and "Souz", compressor stations "Uralsk" and "Chizha". The company's crews replaced 12 km of pipes and contractors - 20 km. Capability of MAC was increased to 50bn m3 a year thanking to parallel work of two lines at Beineu-Makat part. 

For the first time in the last years the company purchased heavy road-building machinery for regional branches. The company continues implementing diagnostics of the most destroyed sections. Managers introduce advanced techniques of repair. For example, this year the company replaces a siphon at passing across the Ural River near "Redut", by applying technique of horizontal-directional drilling under the bottom of the river. This technique is applied in Kazakhstan for the first time; its advantage is preservation of flora and fauna in Ural's flood-lands. 

The company reanimates its economy, applies new technologies, gradually restores capital assets and raises capability of the pipeline. According to forecast of specialists, by 2005, when the company will finish repair, annual volumes of transported Turkmen gas through MAC will increase to 50bn m3, Uzbek one - to 3bn m3, and Kazakh one - to 7bn m3. 

Cost of the total 10-year modernization of MAC is estimated at 1,3bn USD. In addition, for 2003-2005 the enterprise intends to invest over 500mn USD to modernization of main pipelines. These will be own means of the company plus domestic and foreign investments. 

KazTransGas has found principal decision of the problem of gas supply to southern regions of Kazakhstan, which completely depends upon Uzbek gas and its transit through Kyrghyzia. Demand of RK southern regions on gas amounts to 1,5bn m3 annually. In February 2002 the company signed contract with Uztransgas and in 2002 and 2003 purchased gas at 40 USD for a thousand m3.

After long negotiations in December 2002 the company signed agreement with Kyrghyz side on joint inspection of main pipeline Tashkent-Bishkek-Almaty situated in Kyrghyzia. Special joint Kazakh-Kyrghyz commission inspected those lines. The examination proved the Kyrghyz lines being in very bad condition. One third of pipes need replacement and complete re-insulation. Now the companies work out recommendations on repair and reconstruction of 132 km, including variants of financing. The situation is  rather serious, so KazTransGas is going to approach the Government with proposal to establish a joint RK-Kyrghyzia company. 

KazTransGas has always executed terms of contracts, hasn't had debts to the Uzbek side and always protected interests of Kazakhstan in the gas market of the region. 
Therefore, to allay dependence from Uzbek supply and Kyrghyz transit the company launched prospecting of Amangeldy gas field of Zhambyl region. Total cost of the project is 132,4mn USD; republican budget  allots 51mn of those. Now the company is conducting negotiations with potential investors on financing issues and joint  development of the field. KazTransGas' experts forecast Amangeldy field will yield 600mn-1bn m3 of gas annually for 20 years. 

Construction of gas wells at Amangeldy field is planned to complete in 2003. 17 wells will be exploited. Three wells are tested, one well is conserved. The fifth well is drilled. 65% of equipment is produced and ready to ship. 2100 tons of pipes and gas pipeline equipment has been delivered. The works are conducted in day and night regime, KazTransGas specialists believe 193-kilometer Amangeldy-Taraz gas pipeline constructed by mid summer of 203. The gas field is expected to launch in upcoming  August. The specialists hope 700-million cubic meters of natural gas, 40 thousand tons of condensed gas and the same amount of liquefied gas pumped from Amangeldy field to allow them to resolve gas supply problem southern Kazakhstan has faced. 

Moreover, governmental commission presented "KazTransGas" the right to develop hydrocarbons exploration at gas deposits of Moyinkumski and Talasski districts of Zhambyl region. The area of the deposits' territory makes 8 810,7 square kilometers. The work of the company resulted in the trend to stabilize inside republic gas supplying, especially the one of its southern region. In mid ninetieth gas distribution networks of the region appeared in the ownership of different private companies. But their majority faced the problem of nonpayment. It rendered a negative influence upon the state of the networks. The systems sank into degradation. Debts grew. There appeared gas-supplying problems. Bad debtors were cut off. 

To resolve all the problems the responsibility for gas supplying of southern regions was laid on KazTransGas. Its affiliate KazTransGas Distribution company  was created for the purposes. The enterprise is a wholesale supplier of natural gas to regional consumers. Much was done; the market got free from different intermediate structures, the prices grew stable, discipline of payments improved, technological losses of gas decreased. Everything aforementioned influenced upon the growth of tariffs, there appeared a trend of annual three percent increase in the amounts of gas shipments to internal market. In 2001 the amount made 5,1 billion cubic meters. The same growth in amounts was registered in the first half of 2002. 

Work with suppliers and consumers, severed approaches and huge funds invested resulted in obvious successes.

KazTransGas allocated 5 million dollars to restore gas distribution system of Shymkent and repaid the debts of its predecessors. In February of 2002 KazTransGas Distribution started supplying Taraz with gas. At present 75% of the city's private sector are supplied with gas. 

In early current year the situation with Aktobe region gas supplying aggravated. The region is known to consume 36% of total amounts of natural gas imported in Kazakhstan. Local enterprise Aktobegas sank in 1,7 billion tenge debts. The region appeared at stake to be cut off gas supplying. On October the 1st KazTransGas Distribution started supplying Aktobe region and the city of Aktobe with gas. Despite of significant debts of population, the company did not cut anyone off. 

Successful resolution of current problems and implementation of new promising projects, stable development of the company itself prepared the grounds for its international rating growth. Recently international rating agency Standards and Poor's allocated " BB" crediting rating to KazTransGas group and to Intergas Central Asia company. The forecast of ratings is stable. Such a high rating means the activity of the companies, their places at gas transportation market, stability of their financial state and high trustability recognized. 

The fact is strengthening the companies' positions at the negotiations with foreign investors, suppliers, financial institutions. It allows them to count for lower interest rates when attracting local and foreign funds. So, the rating works for the companies. The contracts signed recently with foreign partners showed the work successful. 

Amangeldy gas field: Readiness

ASTANA.KAZINFORM. As Kazinform has earlier informed, on these days blue fuel of Amangeldy gas field is to be supplied to Taraz. The final testing of the gas transportation system before launching has been carried out on the fifth compressor station. 

This is the very place where the Amengeldy line incises into the main gas pipeline. 

According to head of Taraz manufacturing gas pipeline management Nazhentai Bukharbayev, Amangeldy gas has been accepted. The system, which has been transporting gas for many years is absolutely orderly.


According to the preliminary assessment, the stated Amangeldy field gas reserves amount not less than 25 billion cubic meters. From the  wells situated on the field there will be supplied up to 1000 900 cubic  meters of gas a day. As for the cost of Amangeldy gas, this issue is still in the state of economic working-out. 

While Amangeldy complex builders are getting ready for the launch of its first line, the brigades of Kazburgaz-Taraz are opening up new vistas. Out of 13 wells taken for tunneling one is fully ready and three more are to be ready soon. 

On subcontract terms there has been involved one more organization – Udmurtgeologiya from Russia, which has recently delivered its machine, assembled it and started well tunneling. The front of drilling works is been enlarged. 

Amangeldy Gas Production Train Starts Operations 

On October 23 president Nazarbayev inaugurated the first production line at the Amangeldy gas field (Zhambyl oblast), Interfax reported. 

The ceremony marked the end of the first stage of field development, with         completion of five of seventeen gas wells, a gas treatment plant, and construction of a 193-kilometer pipeline connecting Amangeldy field with the Bukhara -Tashkent-Bishkek- Almaty gas pipeline in area of Taraz. The second development phase (timeline not mentioned) will include bringing on line there remaining twelve wells and completion of all associated infrastructure.

The second-phase capacity of 1.93 Million cubic meters a day will supply the 
Zhambyl power plant, the Zhambyl energy combine, local chemical plants, and other industries in the region. 

The development of Amangeldy will cost usd 131 million, with usd 51 million coming from the national budget and the remaining usd 80 million provided by Kaztransgaz and other investors. 

Amangeldy field holds 22.4 Billion cubic meters of gas and is expected to produce 600 million - 1 billion cubic meters of gas a year for twenty years at a cost of usd 22 per 1,000 cubic meters. (Interfax - Kazakhstan, October 30)

Development of new gas field
 The gas transport company KazTransGas has started developing the new Amangeldy gas field (AGF). The Amangeldy field is located in the south of Kazakhstan, 160 km from Taraz city. Preliminary estimates of AGF's reserves are about 25 billion cubic meters of gas. The field is thought to be capable of at least 12-13 years of profitable production.

 The field is in a good location. The development of the field will allow energy independence for region of Southern Kazakhstan, the most densely populated region of the country, through connection of the new Amangeldy-Taraz main gas pipeline to the Gazli-Almaty network. 
Existing power transmission lines and a motorway to the field, will reduce the cost of the project (a high Kazakhstan Government official stated, however, that if the Uzbekistan Government followed a consistent and fair price policy for gas, it would be easier for Kazakhstan to continue to purchase Uzbek gas, rather than developing a new field). 

Today the government remains the first and the only investor in AGF.
In an April 11, 2001 investment presentation it outlined its development strategy. It plans to allocate USD 50 million to develop the field. Of this amount, USD 18 million is to be spent during 2001, including prospecting, complete works to develop the field, and geological engineering prospecting works.  According to independent experts, the total amount required to finance the development of the entire group of fields may come to USD 700-750 million. 

For the first phase, the development will minimally cost USD 76.7 million. This amount includes construction of the gas pipeline (USD 36.7 million), drilling and servicing wells (USD 21 million), construction of a gas processing plant (USD 10 million) and miscellaneous expenses (USD 9 million). 
The second phase may require USD 258 million. This includes further development, internal pipelines, processing and further prospecting drilling.   ABN-AMRO Bank, Citibank, Islamic Bank for Development as well as some Kazakh banks have expressed interest in development of the field. The total number of companies that expressed interest in the project is 30.

U.S. Companies interested in the project of Amangeldy field may contact KazTransGas directly as shown below:   KasTranGas 142 Bogenbay Batyra Almaty 480091, Kazakhstan Tel.: [7] (3272) 62-30-09, 66-11-30 Fax: [7] (3272) 58-82-80 E-mail: Contact: Aydarhan Kusainov, Vice-President   U.S. EMBASSY CONTACT INFORMATION   U.S. Embassy Commercial Service Almaty, Kazakhstan 531 Seyfullin Street, 3d Floor Almaty 480091, Kazakhstan Tel.: [7] (3272) 58-79-18, 58-79-20 Fax: [7] (3272) 58-79-22 E-mail: Contact: James Fluker, Senior Commercial Officer Rita Kan, Commercial Assistant Andrey Chursov, BISNIS Representative

ExxonMobil Kazakhstan  Participates in Two North Caspian Discoveries

Exxon Mobil Corporation (NYSE:XOM) today announced that its subsidiary, ExxonMobil Kazakhstan Inc., has participated in two discoveries in new prospects on the North Caspian Production Sharing Agreement (NCPSA) contract area. 

The first exploration wells on each of the Aktote and Kashagan Southwest prospects were completed successfully and encountered hydrocarbon-bearing intervals. Additional evaluation will be required to determine if the hydrocarbon accumulations are commercially viable.

Aktote-1 and Kashagan Southwest-1 are the third and fourth discoveries on the NCPSA following Kashagan and Kalamkas. The world-class Kashagan discovery was announced in 2000 and declared commercial in June 2002 with estimated resources of more than nine billion barrels of oil.

The drilling of Aktote-1 was carried out on an artificial island. The well was drilled to a total depth of 14,000 feet (4,267 meters) and was tested at a rate of 1,550 barrels per day on a 28/64-inch choke.

Drilling of Kashagan Southwest-1 was also performed on an artificial island. The well was drilled to a total depth of 19,275 feet (5,875 meters) and was tested at a rate of 2,100 barrels per day on a 32/64-inch choke.

"The Aktote and Kashagan Southwest discoveries provide further encouragement that the North Caspian can become an important resource base to help supply the world's growing energy demands," said Jon Thompson, president of ExxonMobil Exploration Company.

The North Caspian PSA covers almost 1.4 million gross acres. Companies involved in exploration and development of this area are Eni (Operator - 16.67 percent), ExxonMobil (16.67 percent), BG (16.67 percent), Inpex (8.33 percent), Phillips (8.33 percent), Shell (16.67 percent), and Total (16.67 percent). Upon completion of the sale of BG International's interest in the NCPSA, ExxonMobil's interest will become 20.37 percent. In addition, ExxonMobil affiliates have a 25 percent interest in the Tengiz field, one of the world's largest oil fields, located on the Eastern shore of the Caspian Sea, and a 7.5 percent interest in the Caspian Pipeline Consortium.

Tengizchevroil exported about 170,000 bbl/d of crude oil in 1999 through the Russian pipeline system; by barge and rail to the Baltic; and by ship, pipeline, and rail to the Black Sea. Tengizchevroil also is considering use of the Tengiz-Aktau pipeline, which underwent a $100-million upgrade in 2000 that increased the pipeline's export capacity from 60,000 bbl/d to 160,000 bbl/d. The March 2001 opening of the Caspian Pipeline Consortium's 990-mile pipeline from the Tengiz oil field to the Russian Black Sea port of Novorossiisk will allow Kazakhstan to boost its oil exports substantially. The pipeline's capacity, initially 140,000-160,000 barrels per day (bbl/d), eventually will increase to 1.34-million bbl/d.

Kazakhstan projects that its crude oil and gas condensate production will rise to almost 800,000 bbl/d in 2001. Most of the growth will be provided by the Tengizchevroil venture, the Karachaganak gas condensate field consortium, and from new fields coming on stream: North Buzachi, Sazankurak, Saztobe, Airankol, and others. By 2002, Kazakhstan plans to have other major fields on stream: Alibekmola, Urikhtau, and Kozhasai. In addition, preliminary drilling in the offshore Kashagan block by the Offshore Kazakhstan International Operating Company (OKIOC) has turned up spectacular results, with analysts estimating possible oil reserves of up to 40 billion barrels (10 billion barrels of which are thought to be recoverable). Although the OKIOC is being very tight-lipped about Kashagan's potential output, oil analysts already are hailing the field as the largest oil discovery in 30 years, bringing fresh optimism to the Caspian Sea region's oil supply potential.

Development of the country's Kashagan oilfield and construction of additional export pipelines in the coming decade could make Kazakhstan one of the world's largest oil producers and exporters. In February 2001, Italy's ENI SpA won a fiercely-contested battle to be the operator for the Kashagan field. Kazakhstan expects that the first oil from the field, which OKIOC is still exploring, will flow in 2005. However, in mid-April 2001 the Kazakh Ministry of Natural Resources & Environmental Protection temporarily suspended drilling in the Kashagan block after two recent oil spills.

Kazakhstan needs to resolve two major issues in order for it to increase oil production further. Development of the offshore potential of Kazakhstan in the Caspian Sea has been slowed by a dispute over ownership rights. This disagreement ties in with a broader debate between Caspian Sea Region states over how the Caspian Sea should be treated under international law (including environmental issues). In 1997, Kazakhstan signed a communique with Turkmenistan pledging to divide their sections of the Caspian along median lines, and in July 1998 Kazakhstan signed a bilateral agreement with Russia (not yet ratified) dividing the northern Caspian seabed along median lines between the two countries. Both of these agreements are interim until the status of the Caspian Sea is settled among all of the littoral states. In April 2001, a planned summit of the Caspian littoral heads of state was postponed for the second time in a month.

The other major issue is the development of export routes to bring Kazakhstan's oil to world markets. In addition to the CPC pipeline, several additional oil export pipeline routes from the Caspian Sea region are under consideration or in development. Kazakhstan had net exports of approximately 473,000 bbl/d of crude oil and and condensate in 2000. The majority was shipped by pipeline, mainly via the Atyrau-Saransk-Samara pipeline through Russia, with additional supplies shipped by rail and by barge across the Caspian Sea. In March 2001, Kazakh President Nursultan Nazarbayev appeared to give Kazakhstan's support to the Baku (Azerbaijan)-Ceyhan (Turkey) Main Export Pipeline, saying that the first oil from the giant Kashagan field would go to the pipeline, which is slated to begin construction in the summer of 2001 and be ready by September 2004. However, Kazakhstan has not officially pledged its support for the pipeline, preferring to keep its export options open.

Under the former Soviet Union, Kazakhstan's pipeline network was integrated with the Russian pipeline system, and all of Kazakhstan's oil was exported through the Russian pipeline system. Kazakhstan's oil production is concentrated in the West, and two export pipelines transport this oil to refineries and export pipelines in Russia. However, Kazakhstan's urban and industrial centers are concentrated in the East, and because they are not connected to the production centers, they must import oil via an oil pipeline from Siberia. As a result, Kazakhstan's pipeline system is fragmented, consisting of the two export pipelines in the West, the import pipeline in the East, and a smaller internal line in the South.

Kazakhstan has three major oil refineries supplying the northern region (at Pavlodar), western region (at Atyrau), and southern region (at Shymkent), with total refining capacity of 427,000 bbl/d. The refinery at Pavlodar is supplied mainly by a crude oil pipeline from Western Siberia, the Atyrau refinery runs solely on domestic crude from northwest Kazakhstan, and the Shymkent refinery currently uses oil from Kazakh fields at Kumkol, Aktyubinsk, and Makatinsk, but utilization is only 60% because it is unable to process other oils.

Since their pipeline networks are interconnected, Russia and Kazakhstan plan to swap 50,000 bbl/d of oil. Kazakhstan will deliver oil to Russian refineries on the Atyrau-Samara pipeline and Russia will deliver oil on the Omsk-Pavlodar pipeline for processing at Kazakh refineries. In addition, Kazakhstan and Iran are poised to begin a swap system whereby Kazakhstan would send its crude oil by ship to the Iranian port of Neka, where it would travel by pipeline to a refinery at Tabriz to be refined and consumed locally. In exchange, Kazakhstan would receive the same volume ready for export at an Iranian port in the Persian Gulf. Kazakhstan and Iran signed an agreement in 1996 under which Kazakhstan must swap up to 120,000 bbl/d through Iran by 2006.

Iran has been involved in a border dispute with Kuwait and Saudi Arabia over demarcation of the border through the northern Gulf continental shelf.  This region contains the 7-13-Tcf Dorra natural gas field, which Iran had begun drilling in early 2000 but stopped after complaints by Kuwait. Saudi Arabia and Kuwait (which do not recognize Iran's claims to Dorra) signed a bilateral agreement in July 2000 on dividing up the field equally between the two countries.   In early 2002, there were reports that Saudi Arabia and Kuwait were planning to develop Dorra even without an agreement with Iran.

The dual Aghar-Dalan field development has been one of National Iranian Gas Company's recent successful natural gas utilization projects. Since coming online in mid-1995, the Aghar and Dalan fields have produced approximately 600 Mmcf/d and 800 Mmcf/d, respectively. Natural gas from both fields is processed at a $300 million facility at the Dalan field, which is also the location of a 40-MW, natural-gas-fired power plant. Most of the treated natural gas from the Dalan processing plant is carried through a 212-mile pipeline for re-injection in the Marun field and other oil fields in Khuzestan province.

Natural Gas Trade (more)
Although India and Iran in 1993 signed an MOU on an overland natural gas pipeline, regional political and security concerns to date have blocked completion of a feasibility study.  Meanwhile, in February 2002, Iran and Pakistan signed an MOU on a pre-feasibility study for a possible 1,600-mile, $4 billion gas pipeline from southern Iran to southeastern Pakistan and on to India. An offshore route bypassing Pakistan is under study by Snamprogetti of Italy, but this could prove to be far too expensive to be feasible.  Another possibility would involve LNG exports to India. In January 2003, the leaders of Iran and India signed an MOU on energy cooperation, including the LNG option.

Besides natural gas exports, Iran also has discussed importing natural gas from Azerbaijan, and already imports some natural gas from Turkmenistan. This natural gas is for use in Iran's northern areas, far from the country's main natural gas reserves in the south. In December 1997, Turkmenistan launched the $190 million Korpezhe-Kurt Kui pipeline to Iran, the first natural gas export pipeline in Central Asia to bypass Russia. ccording to terms of the 25-year contract between the two countries, Iran will take between 177 Bcf and 212 Bcf of natural gas from Turkmenistan annually, with 35% of Turkmen supplies allocated as payment for Iran's contribution to building the pipeline.

<>In December 2001, the presidents of Turkmenistan and Armenia reached an agreement by which Turkmenistan will supply up to 70.6 Bcf per year of natural gas to Armenia via the Korpezhe-Kurt Kui pipeline and across Iran.  Implementation of this deal is contingent on the construction of a long-delayed Iran-Armenia natural gas pipeline (in December 2001, Iran and Armenia signed a deal to build this line at a cost of around $120 million). 

Despite a contraction of the industry since the breakup of the Soviet Union, Kazakhstan remains a major coal producer, consumer, and exporter. Kazakhstan was the third largest coal producer in the Soviet Union, trailing only Russia and Ukraine in total output. Between 1992 and 1999, however, Kazakh coal production, which is centered in the Karaganda and Ekibastuz basins, declined 54%, from 139.5 million short tons (Mmst) to 64.2 Mmst. Coal production declined in large part because of nonpayment by customers and the lack of incentives to export to Russia (due to high rail tariffs for transporting coal within Russia), as well as due to the collapse of domestic demand. Kazakh coal consumption fell nearly 58%--from 94.2 Mmst to 39.5 Mmst--during the same time period.

This decline is significant because coal accounted for about half of all primary energy consumption in Kazakhstan during 1991-1999. In addition, net exports to other former Soviet republics declined by two-thirds from 1991 to 1995 before beginning a modest recovery from 1996 to 2000. This decline in markets forced a severe cut in both coal production from Karaganda, which has a number of underground mines that produce high-quality coking coal. The high cost of extraction, combined with the drop in demand, forced a number of mines to close between 1991 and 1997. However, mines in Ekibastuz, the largest-producing area in Kazakhstan and the third largest coal basin in the former Soviet Union, have remained open and competitive because several mines have been largely privatized.

After nearly a decade of decline, Kazakh coal production is expected to increase in 2001. Kazakh Minister for Energy and Natural Resources Minister Vladimir Shkolnik said in January 2001 that Kazakhstan plans to produce up to 80.5 Mmst of coal in 2001. Preliminary data for 2000 show that the country's production increased 75 Mmst, nearly a 17% increase over 1999. According to Kazakh officials, the Vostochny opencast mine produced 10.6 Mmst of coal in January-September 2000 (against 7.6 Mmst in the same period of 1999, an increase of 39%). In the first two months of 2001, the Vostochny mine produced 3.7 Mmst of coal, a 35.4% increase more than in the same period of 2000. In addition, Bogatyr Access Komir (BAK) reported producing 35.8 Mmst of coal in 2000, 23.1 Mmst at the Bogatyr strip mine (35% more than in 1999) and 12.7 Mmst at the Severny strip mine (20% more than 1999). BAK said its 2001 coal production is slated to rise by 20%, thanks to further expansion at the Bogatyr mine.

Despite a drop in net exports, Kazakhstan is still the largest exporter of coal to the other former Soviet republics, accounting for almost half of the coal shipments among the republics. Russia remains the largest recipient of Kazakh coal, followed by Ukraine. The Russian utilities Sverdlovskenergo and Chelyabenergo are major consumers of sub-bituminous coal from the Ekibastuz basin, and Sverdlovskenergo likely will continue to import coal from Kazakhstan since it acquired two Kazakh mines in 1996 as payment for unpaid debts for power supplied to Kazakhstan. In March 2001, Russia announced plans to import at least 30 Mmst to 40 Mmst of coal from Kazakhstan per year, possibly more, depending on the scale of Russia's economic growth.

Kazakhstan also has arranged to export coal to Kyrgyzstan. In November 2000, the two countries agreed that Kazakhstan would provide Kyrgyzstan with 50,000 tons of coal and other fuel supplies before the end of 2000 in return for 650 million kilowatt-hours of electricity from Kyrgyzstan in the spring of 2001.

Kazakhstan's power generation and consumption have both been on the decline since the country received its independence in 1991. From a 1992 level of 86.2 billion kilowatt-hours (Bkwh), Kazakhstan's electricity consumption dropped to 44.1 Bkwh in 1999, primarily due to a drop in demand from the industrial sector as output fell in the wake of the collapse of the Soviet Union. Kazakhstan's power generation also has experienced an annual decline since independence--the country's total 1999 generation of 44.4 Bkwh was only 56% of its 1992 level of 78.6 Bkwh.

Kazakhstan has 54 fossil-fuel powered plants, five hydroelectric power stations, and a nuclear plant at Aktau. Much of Kazakhstan's generating equipment is old, inefficient, and lacking in modern pollution controls. Kazakhstan's industrialized north consumes about 70% of the country's electricity, and most of Kazakhstan's electricity is generated by coal-fired plants concentrated in the North that burn a dirty, high-ash coal.

Due to its vast, sparsely populated land area, Soviet planners developed Kazakhstan's electricity transmission and distribution system to connect to separate networks: to the Russian network in the North (to Siberian Russia) and northwest (to European Russia), and to the Central Asian network in the South (Kyrgyzstan and Uzbekistan). Following independence, state-run Kazakhstanenergo inherited responsibility for operating the country's deteriorating electricity sector and its separate networks. As part of Kazakhstan's move to a market-based economy, in July 1997 Kazakhstanenergo was divested of its power generation facilities and renamed the Kazakhstan Electricity Grid Operating Company (KEGOC). Kazakhstan has proceeded with privatization of power plants and regional electricity distribution companies in an effort to reform the power sector.

Although Kazakhstan now technically generates enough electricity to meet its demand, the country has suffered from frequent power shortages since 1992 due to the sector's deteriorating infrastructure. The separation of networks means that Kazakhstan is both an exporter and importer of electricity in accordance with regional needs. KEGOC works with UES (Russia) in the western and northern parts of Kazakhstan and with the national energy companies of Kyrgyzstan, Turkmenistan, Tajikistan, and Uzbekistan in the South. Imports from Russia and Kyrgyzstan account for over 10% of domestic consumption, with Uzbekistan also exporting small amounts of power to Kazakhstan. Payment for imported power has been an issue, and both Russian and Kyrgyz suppliers have cut power several times due to unpaid bills. In addition, in November 2000, Kazakhstan's Supreme Court found KEGOC guilty of violating customs rules and fined the company more than $2 million for the transit of undeclared electricity from Russia in 1999.

In order to reduce its dependence on expensive, imported electricity supplies, Kazakhstan has made plans to construct five new combined heat and power stations: the 150-MW Uralskaya TETS, the 450-MW Aktyubinskaya TETS, the 300-MW Mainakskaya GES, the 1,280-MW Yuzhno-Kazakhstanskaya TETS, and the 500 MW Zapadno-Kazakhstanskaya TETS-1. In addition, AES (U.S.) expects to get $30 million from the EBRD to reconstruct and modernize the Ust-Kamenogorsk hydroelectric and heat and power plants and the Shulba hydroelectric plant. Also, a Kazakh-Russian joint venture was set up at Ekibastuz State Regional Power Station 2 in Pavlodar region, where one 350-MW generator is operational and a second was scheduled to be overhauled. The projected capacity of each of the generators is 500 MW.

Kazakhstan had planned to build a new nuclear power station near Lake Balkash, with three units of 640 MW each, but in September 2000 the Kazakh government rejected the blueprints and shelved the project, citing cost and safety concerns, as well as public opinion opposed to the nuclear plant. Nevertheless, Prime Minister Kasymzhomart Tokayev noted that it is necessary "that the public gets used to the idea" of the importance of developing Kazakh nuclear power engineering as a cleaner alternative to coal-generating power plants.

President: Nursultan Nazarbayev (chairman of the Supreme Soviet from February 22, 1990; elected president December 1, 1991; re-elected to a seven-year term on January 10, 1999)
Prime Minister: Kasymzhomart Tokayev (since October 2, 1999)
Independence: December 16, 1991; National holiday: Day of the Republic October 25, 1990 (date on which Kazakhstan declared its sovereignty)
Population (7/00E): 16.7 million
Location: Central Asia, bordering the Caspian Sea, Russia, Turkmenistan, Uzbekistan, Kyrgyzstan, and China
Size: 1,052,100 sq. miles (slightly less than four times the size of Texas)
Major Cities: Almaty; Astana (capital, moved from Almaty in December 1998); Karaganda; Shymkent
Languages: Kazakh (Qazaq, state language), Russian (official, used in everyday business)
Ethnic Groups (1996E): Kazakh (Qazaq) 46%, Russian 34.7%, Ukrainian 4.9%, German 3.1%, Uzbek 2.3%, Tatar 1.9%, other 7.1%
Religion: Muslim 47%, Russian Orthodox 44%, Protestant 2%, other 7%

Minister of Finance: Mazhit Yesenbayev
Minister of Economy & Trade: Zhaksibek Kulekeyev
Currency: Tenge
Market Exchange Rate (4/30/2001): US $1=145.8 Tenge
Nominal Gross Domestic Product (GDP) (2000E): $18.3 billion; (2001E): $19.8 billion
Real GDP Growth Rate (2000E): 9.6%; (2001E): 5.5%
Inflation Rate (Change in Consumer Prices, Dec. 1999-Dec. 2000E): 9.8%; (2001E): 8.0%
Official Unemployment Rate (2000E):3.7%
Current Account Balance (2000E): $1.25 billion
; (2001E): $1.04 billion
Major Trading Partners: Russia, Ukraine, U.S., Uzbekistan, Turkey, U.K., Germany, South Korea, China
Merchandise Exports (2000E): $9.8 billion; (2001E): $10.9 billion
Merchandise Imports (2000E): $7.7 billion; (2001E): $9.0 billion
Merchandise Trade Balance (2000E): $2.1 billion; (2001E): $1.9 billion
Major Exports: oil, ferrous and nonferrous metals, machinery, chemicals, grain, wool, meat, coal
Major Imports: machinery and parts, industrial materials, oil and gas, vehicles
Gold and Foreign Exchange Reserves (2000E): $2.1 billion
External Debt (12/00E): $12.3 billion

Minister of Energy & Natural Resources: Vladimir Shkolnik
Chairman, Kazakhoil National Oil & Gas Company: Nurlan Balgimbayev
Proven Oil Reserves (2000E): 10.0-17.6 billion barrels
Oil Production (2000E): 693,000 bbl/d, of which 598,000 bbl/d is crude oil; (2000E): 771,000 bbl/d
Oil Consumption (2000E): 220,000 bbl/d
Net Oil Exports (2000E): 452,000 bbl/d
Crude Oil Refining Capacity (1/1/2001E): 427,000 bbl/d
Natural Gas Reserves (2000E): 65-70 trillion cubic feet
Natural Gas Production (1999E): 162 billion cubic feet (Bcf)
Natural Gas Consumption (1999E): 480 Bcf
Net Natural Gas Imports (1999E): 318 Bcf
Coal Reserves (1999E): 37.5 billion short tons, of which 34.2 billion is anthracite and bituminous
Coal Production (1999E): 64.2 million short tons (Mmst); (2000E): 75 Mmst
Coal Consumption (1999E): 39.5 Mmst
Electric Generation Capacity (1999E): 17.4 gigawatts
Electricity Generation (1999E): 44.4 billion kilowatt-hours (Bkwh)
Electricity Consumption (1999E): 44.1 Bkwh

Minister of Natural Resources & Environmental Protection:Andar Shukputov
Total Energy Consumption (1999E): 1.5 quadrillion Btu* (0.4% of world total energy consumption)
Energy-Related Carbon Emissions (1999E): 26.6 million metric tons of carbon (0.4% of world total carbon emissions)
Per Capita Energy Consumption (1999E): 97.5 million Btu (vs U.S. value of 355.8 million Btu)
Per Capita Carbon Emissions (1999E): 1.7 metric tons of carbon (vs U.S. value of 5.5 metric tons of carbon)
Energy Intensity (1999E): 58,392 Btu/ $1990 (vs U.S. value of 12,638 Btu/ $1990)**
Carbon Intensity (1999E): 1.1 metric tons of carbon/thousand $1990 (vs U.S. value of 0.19 metric tons/thousand $1990)**
Sectoral Share of Energy Consumption (1998E): Industrial (52.6%), Transportation (41.8%), Residential (5.5%), Commercial (0.0%)
Sectoral Share of Carbon Emissions (1998E): Industrial (56.3%), Transportation (38.1%), Residential (5.6%), Commercial (0.0%)
Fuel Share of Energy Consumption (1999E): Coal (29.9%), Oil (29.5%), Natural Gas (34.5%)
Fuel Share of Carbon Emissions (1999E): Coal (40.8%), Oil (32.0%), Natural Gas (27.3%)
Renewable Energy Consumption (1998E): 66 trillion Btu* (6% decrease from 1997)
Number of People per Motor Vehicle (1998): 12.2 (vs U.S. value of 1.3)
Status in Climate Change Negotiations: Non-Annex I country under the United Nations Framework Convention on Climate Change (ratified May 17th, 1995). Signatory to the Kyoto Protocol (March 12th, 1999).
Major Environmental Issues: Radioactive or toxic chemical sites associated with its former defense industries and test ranges are found throughout the country and pose health risks for humans and animals; industrial pollution is severe in some cities; because the two main rivers which flowed into the Aral Sea have been diverted for irrigation, it is drying up and leaving behind a harmful layer of chemical pesticides and natural salts; these substances are then picked up by the wind and blown into noxious dust storms; pollution in the Caspian Sea; soil pollution from overuse of agricultural chemicals and salination from faulty irrigation practices.
Major International Environmental Agreements: A party to Conventions on Biodiversity, Climate Change, Desertification, Endangered Species, Ozone Layer Protection, Ship Pollution.

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar and wind electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 1998

Organization: Kazakhoil National Oil and Gas Company; KazTransOil (state oil pipeline company); KazTransGaz (state natural gas pipeline company); Kazakhstanugol Corporation (state coal company); Kazakhstan Electricity Grid Operating Company (KEGOC)
Major Oil and Gas Fields: Tengiz (mostly oil), Karachaganak (mostly gas), Kashagan (oil), Uzen, Korolev, Tenge, Uritau (gas), Zhanazhol
Major Oil Ports: Atyrau and Aktau on the Caspian Sea
Oil Export Pipelines: Tengiz-Novorosiissk (Russia); Uzen-Atyrau-Samara (Russia); Kenkyak-Orsk (Russia) line that transports oil from the Aktyubinsk fields to the Orsk refinery
Major Oil Refineries (crude oil refining capacity): Pavlodar (162,666 bbl/d); Atyrau (104,427 bbl/d); Shymkent (160,000 bbl/d)
Major Power Plants (capacity): Ekibastuz No.1 (4,000 megawatts, MW), Yermak (2,400 MW), Dzhambul (1,230 MW)