Reliance on Hydrocarbons Still Key for Kazakhstan

Trade conferences rarely highlight negative trends within specific industries, but this year’s Kazakhstan International Oil and Gas Exhibition (KIOGE) in Almaty heralded a revival of the oil and gas sector, both within the country and globally. world.

A large number of participants gathered for the first conference and KIOGE in person in four years.

The plenary session, hosted by former US diplomat Matthew Bryza, focused on “new challenges” for the industry in Kazakhstan, namely the transition to greener energy sources and a renewed focus on ESG criteria, which measure the impact of companies in the environment, society and governance.

Energy Minister Bolat Akchulakov said the country will present a new contract model for the use of the subsoil aimed at facilitating regulation and potentially allowing tax exemptions.

In the western oil regions, the government is also planning the construction of several petrochemical facilities, a revival of earlier plans that were sidetracked by price shocks and the COVID-19 pandemic.

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Renewable energy sources were only mentioned at the end of Akchulakov’s speech, when he spoke about the country’s ambitious decarbonization goals.

Other speakers, including Jamie Webster of the Boston Consulting Group and Joseph McMonigle, Secretary General of the International Energy Forum, highlighted the paramount importance of fossil fuel consumption on the path to decarbonization.

According to Webster, before the demand for hydrocarbons falls due to ongoing decarbonization efforts, consumption will continue to increase in the coming years. The key, the speaker argued, is to find cleaner sources, such as natural gas, as opposed to coal and oil, which are significantly more polluting.

“Coal production is at its highest point; the share of coal in power generation is increasing, compared to the previous declining trend; and countries in the Global South are turning to biomass,” said Webster. “These three trends would not have happened if the world had invested enough in the development of the natural gas industry.”

Despite the downward trends highlighted by Akchulakov, in particular the possible decline in coal production in Kazakhstan, official statistics show that coal extraction has grown by 21 percent in the first seven months of the year.

For Kazakhstan, the next few years will focus on the consolidation of the oil and gas sector and the IPOs of major state-owned companies.

However, thorny issues continue to plague Kazakhstan’s export potential. The Caspian Pipeline Consortium (CPC), which links the country’s largest fields with the Russian port of Novorossiysk, has encountered several setbacks this year, from sea storms to abrupt stoppages.

Akchulakov assured the press that the pipeline would resume full operation in mid-October after repairs.

“We will return to the usual levels of exports once repairs are also completed in Kashagan, by October 20,” Akchulakov told reporters on the sidelines of the conference.

The Kashagan offshore oil field, operated by an international consortium, had been pumping oil at reduced rates since early August due to a gas leak.

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Last week, Kazmunaigas, controlled by the sovereign wealth fund Samruk-Kazyna, bought back a 50 percent stake in KMG Kashagan BV, the company registered in the Netherlands that owns a 16.8% stake in the Kashagan project. Kazmunaigas had sold the stake to Samruk-Kazyna in 2015 as it was looking for cash to pay off its debt. Now, as he looks to launch an initial public offering in the next few years, Kazmunaigas is cleaning house.

At KIOGE, Sanzhar Zharkeshov, Chairman of Qazaqgaz, announced that the company would launch an initial public offering in 2025. In addition, the company established two new branches, Qazaqgaz Exploration and Production and Qazaqgaz Research and Development.

Qazaqgaz, formerly known as KazTransGas, was headed by Kairat Sharipbayev until mid-January, when he was fired following the urban protests that shook the country from Zhanaozen to Almaty. Sharipbayev was rumored to be near Dariga Nazarbayevathe eldest daughter of the country’s former president, Nursultan Nazarbayev.

That both Kazmunaigas and Qazaqgaz work on natural gas exploration and development could be seen as a conflict of interest within the state-owned companies. But Zharkeshov was clear in affirming his company’s new role: “Yes, there should be an independent natural gas company. As the president said last year, this brings us in line with global trends. I hope this ends debates in the industry about whether or not this was an appropriate move.”

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