Country Analysis: Kazakhstan

Jul 31, 2002 02:00 AM

Kazakhstan is important to world energy markets because it has significant oil and natural gas reserves. As foreign investment pours into the country's oil and natural gas sectors, the landlocked Central Asian state is beginning to realize its enormous production potential. With sufficient export options, Kazakhstan could become one of the world's largest oil producers and exporters in the next decade.

Kazakhstan, the largest of the former Soviet Central Asian republics, emerged as an independent country following the 1991 collapse of the Soviet Union. Following several years of economic contraction in the early 1990's, Kazakhstan, which is heavily dependent on oil revenues, posted its first economic growth in 1996-1997, only to fall into recession again in 1998 due to the effects of the August 1998 financial crisis in Russia and slumping world oil prices. However, the recovery of world oil prices in 1999-2000, combined with a well-timed devaluation of the country's currency, the tenge, pulled the economy out of recession.
Kazakhstan has experienced impressive economic growth over the past three years, buoyed by increased oil exports, as well as by prudent fiscal policies and economic initiatives that were instituted in 1999. The results included a sharp reduction of inflation, which dropped to just 6.6 % in 2001, a budget surplus, a stable currency, and a decreasing unemployment rate (3.3 % in 2001). After posting moderate growth of 2.7 % in 1999 as a whole, Kazakhstan's real gross domestic product (GDP) rose 9.8 % in 2000, which was three times higher than the official government projection at the beginning of the year.

In 2001, Kazakhstan built on the previous year's economic performance by increasing its real GDP by an additional 13.2 %, easily the country's best year of economic performance since independence. Kazakhstan's real GDP is expected to increase an additional 7 % in 2002. The main driver behind Kazakhstan's economic growth has been foreign investment, mainly in the country's booming oil and natural gas industries.
Since independence from Soviet rule in 1991, Kazakhstan has received approximately $ 13 bn in foreign investment in its oil and natural gas industries. According to Kazakh Minister of Economy and Trade Zhaksibek Kulekeyev, the oil industry currently accounts for approximately 30 % of Kazakhstan's government budget revenue, and oil accounts for half of Kazakhstan's exports.

In January 2001, Kazakh President Nursultan 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 mm from US oil major Chevron (now ChevronTexaco) 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 2002, President Nazarbayev decreed the formation of KazMunayGaz, a new national oil and natural gas company. According to Kazakh officials, the main aim of establishing KazMunayGaz, which was formed through the merger of state oil company KazakhOil and the national oil and gas transportation firm TransNefteGaz, is to ensure a single state policy on using the country's mineral resources. Kazakhstan also is looking to its new national energy company to compete with foreign energy companies as the massive untapped oil and natural gas reserves in the Kazakh sector of the Caspian Sea begin to be exploited.

After Russia, Kazakhstan was the second largest oil-producing republic in the former Soviet Union at the time of its collapse, with production of over half a million bpd in 1991. Kazakhstan has significant petroleum reserves, with proven reserves estimated at 5.4 bn barrels of oil. In addition, Kazakhstan's possible hydrocarbon reserves, both onshore and offshore, dwarf its proven reserves, with estimated possible reserves -- mostly in the Kazakh sector of the Caspian Sea -- of between 30 bn and 50 bn barrels.
Kazakh officials have said that the offshore Kashagan field alone may contain up to 50 bn barrels of oil. Following its independence in 1991 Kazakhstan opened up its oil sector to investment and development by foreign energy companies. International projects have taken the form of joint ventures with KazakhOil (now KazMunayGaz), the national oil company, as well as production-sharing agreements (PSAs), and exploration/field concessions.
Although Kazakhstan's oil production dropped to just 415,000 bpd in the first few years after the collapse of the Soviet Union, the massive level of foreign investment into Kazakhstan's oil sector over the past 11 years has helped the country boost its oil production from 530,000 bpd in 1992 to 811,000 bpd in 2001.

Kazakhstan's oil production has doubled in just the past six years. Output has been increasing by approximately 15 % per year since 1998, and the country is expected to produce over 900,000 bpd in 2002. From January 2002 through May 2002, Kazakh production of oil and gas condensate totalled 18.52 mm tons (892,600 bpd), a 12.4 % increase from the same time period in 2001.
In addition, with a number of major oil fields recently coming onstream, including North Buzachi, Sazankurak, Saztobe, Chinarevskoye, and Airankol, and fields such as Alibekmola, Urikhtau, and Kozhasai set to begin producing shortly, Kazakhstan will increase its oil production significantly in the next decade. Kazakh oil production is expected to reach 1.2 mm bpd in 2005, 2 mm bpd by 2010, and as much as 2.5 mm bpd by 2015.
Most of this growth will come from three enormous fields: Tengiz, Karachaganak, and Kashagan. The Tengiz field, with 6 to 9 bn barrels of estimated oil reserves, is being developed by the TengizChevrOil joint venture. In April 1993, Chevron (now ChevronTexaco) concluded a $ 20 bn agreement with the Kazakh government to form the TengizChevrOil joint venture to develop the Tengiz field. Production at the fieldhas increased from 25,000 bpd in 1993 to slightly over 250,000 bpd in mid-2002. ChevronTexaco plans to invest $ 3 bn over the next three years to expand TCO's production capacity.

TengizChevrOil is expected to increase production to 400,000 bpd by 2005 and, given adequate export outlets, the joint venture could reach peak production of 750,000 bpd by 2010. The Karachaganak field, which is being developed by Karachaganak Integrated Organization (KIO), a consortium led by Britain's BG and Agip (Italy), has estimated reserves of 2.3 bn barrels of oil and gas condensate, as well as 16 tcf of natural gas.
In 1997, KIO signed an $ 8 bn production sharing agreement to develop the Karachaganak field for 40 years, with a planned investment of $ 4 bn by 2006. Thus far, the development program has focused on producing gas condensate; in the first five months of 2002, the Karachaganak field was producing 99,685 bpd of liquid hydrocarbons, with production scheduled to increase to between 180,000 bpd and 240,000 bpdof condensate annually during the next two years.

Although work on the offshore Kashagan field is still in the exploration stage, preliminary drilling results indicate that the field is huge, and analysts have been hailing the field as the largest oil discovery in the world in the past 30 years. In February 2001, Italy's ENI, Agip's parent company, won a fiercely contested battle among partners in the Offshore Kazakhstan International Operating Company (OKIOC) to be the operator for the field. OKIOC was subsequently renamed the Agip Kazakhstan North Caspian Operating Company (Agip KCO).
In March 2001, Agip KCO discovered oil in Kashagan West 1, a well located 25 miles from the first well drilled (Kashagan East 1). Although Agip KCO released estimates in June 2002 that the Kashagan field holds between seven and 9 bn barrels of crude in proven reserves, as well as 38 bn barrels in probable reserves, both Kazakh officials and energy analysts have called that estimate "conservative."
Output at the first stage of development, planned for 2005, is expected to be 100,000 bpd, and further development likely will catapult Kazakhstan into the top five oil producers in the world. However, Kazakhstan needs to resolve two major issues -- Caspian ownership rights and export routes -- before it can reach its full oil-producing potential.

Caspian Sea issues
According to Kazakh Prime Minister Imangali Tasmagambetov, up to $ 120 bn could be invested in Kazakhstan's sector of the Caspian Sea over the next 10 years. Development of the offshore potential of Kazakhstan in the Caspian Sea has been slowed, however, by the ongoing dispute among the littoral states over ownership rights. This disagreement ties in with a broader debate between the Caspian Sea states over how the sea should be treated under international law and how to protect its fragile environment while exploiting its oil and natural gas resources.
Kazakhstan already has signed bilateral agreements with Turkmenistan, Azerbaijan, and Russia, pledging to divide their sections of the Caspian along median lines. However, in July 2001, an Iranian gunship forced a British Petroleum (BP) exploration vessel out of waters claimed by Iran but licensed to BP by Azerbaijan, heightening tensions and highlighting the need for a multilateral agreement.
In April 2002, a long-delayed summit of the Caspian littoral heads of state failed to produce a multilateral agreement on the sea's legal status. Nevertheless, Kazakhstan and Russia recently agreed on a plan to develop jointly the disputed Kurmangazy field, and Kazakhstan is proceeding with development of its sector of the Caspian.

Oil exports
The other major issue is the development of export routes to bring landlocked Kazakh oil to world markets. During the Soviet era, Kazakhstan's oil pipelines were integrated with Russia's, and all of Kazakhstan's oil was exported through the Russian pipeline system.
Kazakhstan's net oil exports rose to 631,000 bpd in 2001, but the country's remoteness from world markets, along with its lack of export pipelines, has hindered the further growth of exports. In 2001, the majority of Kazakh oil exports was shipped by pipeline, mainly via the Atyrau-Samara pipeline through Russia, with additional supplies shipped by rail and by barge across the Caspian Sea.
Kazakhstan took a major step towards increasing its oil exporting potential in March 2001 with the launch of the 990-mile Caspian Pipeline Consortium (CPC) pipeline. The $ 2.5 bn, 1.34 mm-bpd-capacity pipeline will allow Kazakhstan to pipe its oil directly from the Tengiz field to Russia's Black Sea port of Novorossiisk. The first oil from the pipeline was scheduled to be loaded in June 2001, but several customs problems and technical hitches caused delays.

After Russia and Kazakhstan reached agreement on transit tariffs for the pipeline, the first crude oil was loaded onto a tanker in Novorossiisk on October 15, 2001, and the pipeline was officially opened on November 27, 2001. In addition to the CPC pipeline, several additional oil export pipeline routes from the Caspian Sea region are under consideration or in development.
Kazakh President Nursultan Nazarbayev has expressed support for the Baku-Ceyhan Main Export Pipeline, but the country has not officially pledged to use the pipeline, preferring to keep its export options open. Kazakhstan and Iran have begun oil swaps and discussed a pipeline connecting the two countries, and in June 2002 Kazakhstan and Russia signed a 15-year oil transit agreement under which Kazakhstan will export at least 350,000 bpd of oil annually via the Russian pipeline system.

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 bpd. The refinery at Pavlodar is supplied mainly by a crude oil pipeline from western Siberia (since Russian reserves are well placed geographically to serve that refinery), 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, although it is linked by pipeline to Russia.
In January 2002, Kazakhstan gave the Marubeni Corporation, in collaboration with the Japan Gas Corporation, the go-ahead to carry out modernization work at the Atyrau oil refinery. Marubeni already has carried out a feasibility study for the project under an understanding signed with the Kazakhstan government in May 1998 and financed by the Japan Bank for International Cooperation. No timetable has been set yet for the renovation.

In the first two months of 2002, Kazakhstan's refineries processed 1.19 mm tons of oil (an average of approximately 143,388 bpd), up 2.9 % from the same time period in 2001. The Pavlodar refinery processed an average of 38,353 bpd (a 28.4 % year-on-year increase), the Atyrau refinery handled 27,316 bpd (down 29.2 %), and the Shymkent facility refined approximately 78,104 bpd (a 9.6 % year-on-year increase). The three refineries produced 30,075 bpd of gasoline (an increase of 15.2 % year-on-year) during this period, 40,739 bpd of diesel fuel (a 12 % increase), and 34,955 bpd of fuel oil (a 14.4 % decrease year-on-year).

Natural gas
Kazakhstan has proven reserves of 65 tcf of natural gas, ranking it in the top 20 countries in the world in terms of natural gas reserves. However, the country's natural gas industry is significantly underdeveloped, and the sector's further development is hampered by a lack of infrastructure.
Kazakhstan's natural gas deposits are mainly located in the western part of the country, while the potential consuming areas are in the south and north. The lack of internal pipelines connecting the country's natural gas-producing areas to the industrial belt between Almaty and Shymkent has hampered Kazakh natural gas production, with many oil producers flaring the natural gas instead of using it.
More than 40 % of Kazakhstan's proven natural gas reserves are located in one field, the giant Karachaganak field in the northwest near the border with Russia. Kazakhstan's other significant natural gas deposits include the Tengiz, Zhanazhol, and Uritau fields, and many of the undeveloped offshore areas -- including the massive Kashagan field -- also are believed to hold large amounts of natural gas.

Although the international consortium developing Karachaganak has concentrated mainly on producing gas condensate thus far, the field yielded 132 bn cf of natural gas in 2001. Through the first five months of 2002, the Karachaganak Integrated Organization extracted an additional 68.8 bn cf of natural gas from the field.
In order to remove disincentives to the development of the country's natural gas industry, in August 1999 the Kazakh government passed a law requiring subsoil users (such as oil companies) to include natural gas utilization projects in their development plans. As a result, in 2000, Kazakhstan increased its natural gas production to 314 bn cf, the highest level in the past decade.
According to preliminary 2001 figures, Kazakhstan produced 324 bn cf of natural gas in 2001, a 3.1 % increase over 2000. From January 2002 through May 2002, Kazakh natural gas production totalled 158.5 bn cf, a 2.1 % year-on-year increase from the same time period in 2001.

Natural gas distribution
KazMunayGaz, the new state oil and natural gas company, is now the operator of Kazakhstan's main natural gas pipelines. The company, which took over the assets of KazTransGaz when it was created in February 2002, owns over 5,400 miles of trunk pipelines, as well as 26 compressor stations with 308 gas transportation units. Since Kazakhstan is such a large, sparsely populated country, it has two separate domestic natural gas distribution networks, in the west and in the south.
However, due to the lack of a pipeline linking the natural gas fields in the western part of the country to consumers in the south, the southernareas of Kazakhstan are almost completely dependent on imported supplies. Although Kazakhstan is considering the construction of an internal pipeline to link its natural gas-producing and consuming areas, the prohibitive cost (at least $ 1 bn) of such a pipeline has delayed any decision to go ahead with the project.

Kazakhstan invested around $ 120 mm to upgrade its natural gas pipeline network in 2001, including about $ 10 mm in meters for regional systems, regular maintenance, personnel training, and new equipment. KazTransGaz began restoration work on the southern natural gas pipeline system in 2001, including repairing 24 miles of pipelines and modernizing 23 wells at the Poltoraskoye underground natural gas storage facility.

Natural gas imports
With 2000 natural gas consumption of 491 bn cf, Kazakhstan currently imports around 35 % of its natural gas needs, mainly from Uzbekistan, but with a small amount from Russia as well. The southern region of the country -- from Shymkent to the former capital of Almaty -- receives its natural gas supplies from Uzbekistan via the Tashkent-Bishkek-Almaty pipeline. This pipeline snakes through Uzbekistan before reaching Shymkent, then transits Kyrgyzstan and terminates in Almaty.
Kazakhstan's dependence on imported natural gas for its southern regions has been problematic during the past two winters, when erratic pricing and supplies from Uzbekistan, combined with illegal tapping of the pipeline by Kyrgyzstan, resulted in significant supply disruptions to Almaty in the middle of the heating season. As a result, Kazakhstan is determined to end its dependence on imported supplies for its southern regions.

Kazakhstan is pinning its hopes on the development of the Amangeldy and other gas fields in southern Kazakhstan. The Amangeldy and nearby Ayrykty fields in the Zhambyl region of southern Kazakhstan have estimated natural gas reserves of more than 777 bn cf, which would be enough to provide uninterrupted natural gas supplies to the southern regions of the country for at least 12 years.
Kazakhstan started work at the Amangeldy deposit in the spring of 2001, and began drilling the first of four wells in August 2001. Complete development of the field will cost approximately $ 770 mm, with production set to begin at the start of 2003. Kazakh officials hopes to become independent of Uzbek natural gas supplies by 2005.

Natural gas exports
Until recently, Kazakhstan has been limited in its ability to export its natural gas, since the country's natural gas fields were not linked to Russia's natural gas pipeline system. However, as investment continues to pour into the Kazakh natural gas sector, the country's natural gas production is set to increase dramatically, and provided that the necessary infrastructure is built, Kazakhstan soon could become a major natural gas exporter.
In August 2001, the Kazakh Ministry for Energy and Mineral Resources approved a 15-year strategy for developing the country's natural gas sector that would increase natural gas production fivefold. According to the strategy, which the Kazakh government approved, Kazakhstan is aiming to increase its natural gas production to 1.2 tcf by 2005, to 1.66 tcf by 2010, and to 1.84 tcf by 2015. Key to this strategy is the development of natural gas reserves at Kashagan, Karachaganak, and Tengiz.

With domestic natural gas demand expected to remain stable, Kazakhstan will be able to increase its natural gas exports to nearly 1.2 tcf by 1015, according to Uzakbai Karabalin, deputy minister of energy and mineral resources. In June 2002, KazMunayGaz and Russia's Gazprom created KazRosGaz, a joint venture that will allow Kazakhstan to pipe its natural gas through the Russian pipeline system for the first time. According to Russian officials, KazRosGaz will have the ability to transport 125 bn cf of Kazakh natural gas via Russia, increasing up to 1.77 tcf in the future.
Since Kazakh natural gas is a potential competitor with Russian natural gas, several new natural gas export pipelines from the Caspian Sea region also are in development or under consideration, potentially opening up new markets for Kazakh natural gas. In the meantime, Kazakhstan serves as an important natural gas transit centre for Turkmen and Uzbek natural gas that is piped to Russia and beyond.

Despite a contraction of the industry since the break-up 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 centred in the Karaganda and Ekibastuz basins, declined 54 %, from 139.5 mm short tons to 64.3 mm short tons. Coal production declined in large part because of non-payment 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.
After nearly a decade of decline, Kazakh coal production increased to approximately 82.4 mm tons in 2000. According to Kazakhstan's official state statistics agency, Bogatyr Access Komir (BAK), the country's main coal mining enterprise that is a subsidiary of Access Industries (US), maintained its coal production level from 2000 in 2001, with production of about 35 mm tons of coal at the Bogatyr and Severny coal fields in northern Kazakhstan.

Maikuben-Vest, which mines coal in the Pavlodar region, produced 1.99 mm tons of brown coal in the first ten months of 2001, 57.6 % more than in the same period of 2000. Through the first six months of 2001, the Vostochny strip mine increased production 25.2 % year-on-year, to 9 mm tons.
Coal accounted for about half of all primary energy consumption in Kazakhstan during the 1990's. From 1992 to 1999, Kazakhstan's coal consumption fell nearly 47 % -- from 94.2 mm tons to 50.3 mm tons. In 2000, the country's coal consumption increased for the first time since Kazakhstan's independence, with robust economic growth contributing to a 34 % increase in coal consumption, to 67.6 mm tons.

Coal exports
Kazakhstan's net coal exports to other former Soviet republics declined by two-thirds from 1991 to 1995 before making 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 after being privatised.

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 importer 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 between 30 mm tons to 40 mm tons of coal from Kazakhstan per year, possibly more, depending on the scale of Russia's economic growth. With the recent move to cash payments for coal, some potential consumers of Kazakh coal have turned out to be insolvent.
Nevertheless, in August 2001, Kazakh officials announced plans to increase the country's annual coal production to over 95 mm tons by 2005, of which about 60 mm tons will be used domestically and over 30 mm tons will be exported. BAK plans to produce 40 mm tons of coal in 2002 and 50 mm tons by 2005.

Kazakhstan has 71 power plants, including five hydroelectric power stations, giving the country an overall installed generating capacity of 17.3 GW. Most of Kazakhstan's power plants are combined heat and power plants, approximately 70 % of which use coal, 15 % natural gas, and the remaining 15 % hydroelectric power. Much of the country's electricity is generated by coal-fired plants that burn a dirty, high-ash coal, and the majority of the country's electric-generating equipment is old, inefficient, and lacking in modern pollution controls.

Sectoral reform
Following the collapse of the Soviet Union in 1991, state-run Kazakhstanenergo inherited responsibility for operating the country's power-generating facilities and its 15 separate regional electricity distribution networks. As part of Kazakhstan's move to a market-based economy, in July 1997 Kazakhstanenergo was divested of its power generation facilities, creating independent generating companies, and then renamed the Kazakhstan Electricity Grid Operating Company (KEGOC).
Since then, in an effort to increase the efficiency of the power sector, Kazakhstan has privatised all of its power plants, but the sale of regional electricity distribution companies has proceeded more slowly, and the majority of the distribution networks have not yet been privatised. KEGOC has granted management rights to several private companies, but KEGOC maintains control over high-voltage transmission lines, substations, and the central dispatching apparatus.

Non-payment of electricity bills, an inadequate collection system, and the lack of market-based transportation tariffs have been obstacles to further large-scale investment in Kazakhstan's transmission and distribution sector. Under the former Soviet system, Kazakhstan utilized a system of fixed electricity tariffs that were unrelated to production costs and investment needs. Kazakhstan's State Anti-Monopoly Committee is working to bring electricity tariffs in line with those in other countries and to allow the market to determine transmission tariffs. Effective July 1, 2001, KEGOC increased electricity transmission rates across the country by an average of 23.7 %.

Power generation and consumption
After seven consecutive years of declining electricity production, in 2000 Kazakhstan generated 48.7 bn kW-hours of power, an 8 % increase over 1999. Likewise, Kazakhstan's overall electricity consumption plummeted from 86.2 bn kWh in 1992 to 44.8 bn kWh in 1999, primarily due to a drop in demand from the industrial sector as output fell after independence. Owing to robust economic growth, Kazakh electricity consumption in 2000 rose 7.8 % to 48.3 bn kWh.
Kazakhstan's industrialized north produces about 80 % and consumes about 70 % of the country's electricity. Although Kazakhstan 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. Kazakhstan incurs large energy losses during transmission and distribution over its 285,000 miles of distribution lines.
Accordingto Kazakh Minister of Energy and Natural Resources Vladimir Shkolnik, an average of 15 % of the electricity generated in Kazakhstan is lost before it reaches consumers, owing to the widespread deterioration of Kazakhstan's power infrastructure.

Transmission and distribution
The power grids in northern Kazakhstan began to work parallel to Russia's Unified Energy Systems in 1999 and later with the Unified Energy System of Central Asia (which also includes Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) to solve the problem of uneven energy distribution in Kazakhstan. In January 2002, Kazakhstan withdrew from the Unified Energy System of Central Asia, citing a lack of formal agreement governing the system, but the country rejoined in April 2002 after signing five bilateral agreements with the other countries.
KEGOC estimates that it needs $ 258 mm to reconstruct its electricity networks and overhaul its switching equipment in order to improve the reliability of its electricity supply, andto develop the power market through a power pool and improved access to the transmission network. In 1999, the World Bank's International Bank for Reconstruction and Development agreed to extend a $ 140 mm loan to the government of Kazakhstan and KEGOC toward this electricity transmission rehabilitation project.
Additional financing will be provided by KEGOC ($ 62.4 mm) and the European Bank for Reconstruction and Development ($ 56 mm). The US Agency for International Development also is assisting Kazakhstan to develop a power pool for the regional distribution companies.

Since Kazakhstan's southern regions are largely dependent on expensive imported electricity supplies, KEGOC is considering building a second North-South power line to complement the existing, 600-MW-capacity line, making it possible to supply the country's southern regions fully with energy generated in Kazakhstan.
The line would cost an estimated $ 300 mm to build. In addition, 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.

Nuclear power
Kazakhstan's sole nuclear power plant -- the 90-MW Mangyshlak Nuclear Power Plant at Aqtau -- was shut down in April 1999 after nearly 26 years in operation. In September 2000, the Kazakh government shelved plans to build a 640-MW nuclear plant in the east near Lake Balkash, citing cost and safety concerns, as well as public opinion opposed to the nuclear plant. Currently there are no plans to build any new nuclear plants in Kazakhstan.

Country overview
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: Imangali Tasmagambetov (since January 2002)
Independence: December 16, 1991;
National holiday: Republic Day, October 25, 1990 (date on which Kazakhstan declared its sovereignty)
Population (7/01E): 16.7 mm
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) 40 %, Russian (official, used in everyday business) 66 %
Ethnic groups (1999E): Kazakh (Qazaq) 53.4 %, Russian 30 %, Ukrainian 3.7 %, Uzbek 2.5 %, German 2.4 %, Uighur 1.4 %, other 6.6 %
Religions: Muslim 47 %, Russian Orthodox 44 %, Protestant 2 %, other 7 %

Economic overview
Minister of Finance: Aleksandr Pavlov
Minister of Economy & Trade: Mazhit Yesenbayev
Currency: Tenge
Market exchange rate (07-12-02): $ 1 = 153.1 Tenge (KZT)
Nominal Gross Domestic Product (GDP) (2001E): $ 21.4 bn; (2002E): $ 22.9 bn
Real GDP growth rate (2001E): 13.2 %;(2002E): 7.0 %
Inflation rate (change in consumer prices, Dec. 2000-Dec. 2001E): 6.6 %; (2002E): 5.6 %
Official unemployment rate (2001E): 3.3 %
Current account balance (2001E): -$ 1.35 bn; (2002E): -$ 1.75 bn
Major trading partners (1999): Russia, US, Uzbekistan, China, Turkey, UK, Germany, Ukraine, South Korea
Merchandise exports (2001E): $ 9.7 bn; (2002E): $ 9.8 bn
Merchandise imports (2001E): $ 8.7 bn; (2002E): $ 9.3 bn
Merchandise trade balance (2001E): $ 1.0 bn; (2002E): $ 0.5 bn
Major exports: Oil, ferrous and nonferrous metals, machinery, chemicals, grain, wool, meat, coal
Major imports: Machinery and parts, industrial materials, oil and gas, vehicles
External debt (12/01E): $ 13.8 bn

Energy overview
Minister of Energy & Natural Resources: Vladimir Shkolnik Chairman, KazMunayGaz (National Oil & Natural Gas Company): Lyazzat Kiinov
Proven oil reserves (1/1/02E): 5.4 bn barrels
Oil production (2001E): 811,000 bpd, of which 704,200 bpd was crude; (2002E): 887,900 bpd
Oil consumption (2001E): 180,000 bpd
Net oil exports (2001E): 631,000 bpd
Crude oil refining capacity (1/1/02E): 427,000 bpd
Natural gas reserves (1/1/02E): 65 tcf
Natural gas production (2000E): 314.3 bn cf; (2001E): 324 bn cf

Natural gas consumption (2000E): 490.9 bn cf
Net natural gas imports (2000E): 176.6 bn cf
Coal reserves (1/1/02E): 37.5 bn short tons, of which 34.2 bn is anthracite and bituminous
Coal production (2000E): 82.4 mm short tons
Coal consumption (2000E): 67.6 mm short tons
Electric generation capacity (2000E): 17.3 GW
Electricity generation (2000E): 48.7 bn kWh
Electricity consumption (2000E): 48.3 bn kWh

Environmental overview
Minister of Natural Resources & Environmental Protection: Andar Shukputov
Total energy consumption (2000E): 1.79 quadrillion Btu* (0.45 % of world total energy consumption)
Energy-related carbon emissions (2000E): 35.0 mm tons of carbon (0.5 % of world total carbon emissions)
Per capita energy consumption (2000E): 120.2 mm Btu (vs. US value of 351.0 mm Btu)
Per capita carbon emissions (2000E): 2.4 tons of carbon (vs. US value of 5.6 tons of carbon)
Energy intensity (2000E): 95,916 Btu/$ 1995 (vs. US value of 10,918 Btu/$ 1995)**
Carbon intensity (2000E): 1.88 tons of carbon/thousand $ 1995 (vs. US value of 0.17 tons/thousand $ 1995)**
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 (2000E): Coal (46.9 %), natural gas (28.5 %), oil (18.4 %)
Fuel share of carbon emissions (2000E): Coal (60.3 %), natural gas (21.2 %), oil (18.5 %)
Renewable energy consumption (1998E): 66 t Btu* (6 % decrease from 1997)
Number of people per motor vehicle (1998): 12.2 (vs. US 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 defence 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 poor infrastructure and wasteful irrigation practices
Major international environmental agreements: A party to Conventions on Air Pollution, Biodiversity, Climate Change, Desertification, Endangered Species, Ozone Layer Protection, Ship Pollution. Signed, but not ratified: Climate Change.

* 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 2000

Energy industry
Organization: KazMunayGaz (vertically-integrated state oil and natural gas company, created in February 2002 by combining state-run KazakhOil (oil) and TransNefteGaz (oil and natural gas transport, made up of KazTransOil and KazTransGaz)); Kazakhstanugol (state coal company); Kazakhstan Electricity Grid Operating Company (KEGOC)
Major oil and gas fields: Tengiz (mostly oil), Karachaganak (mostly natural gas), Kashagan (oil), Uzen, Kumkol, Korolev, Tenge, Uritau (natural gas), Zhanazhol
Major oil ports: Atyrau and Aqtau on the Caspian Sea
Oil export pipelines: Tengiz-Novorossiisk (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 (162,500 bpd); Atyrau (104,500 bpd); Shymkent (160,000 bpd)
Major power plants (capacity): Ekibastuz No.1 (4,000 MW, MW), Yermak (2,400 MW), Zhambyl (1,230 MW)

Source: EIA
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