KMG set to play an even bigger global role in energy

Oct 28, 2010 12:00 AM

A KazEnergy panel on ensuring energy security agreed that sufficient reserves plus location are major factors for supplying energy to meet global demand.

Because Kazakhstan has huge reserves and a critical Eurasian location, it is indispensable for meeting world demand, and things are looking good for its state oil and gas concern, KazMunaiGas. Kairgeldy Kabyldin, chairman of KazMunaiGaz, said that KMG’s prospects for the next 20 years are promising indeed.

Kazakhstan is in the top 10 for world hydrocarbon reserves (5.3 bn tons of oil and 3.3 tcm of gas) and plans by 2020 to become atop 10 production country, with forecast output of 140 mm tons. This places KMG in a strong position to help ensure energy security for large parts of the planet. Kazakhstan will invest $ 35 bn in its oil and gas sector in 2010-14, and KMG will naturally play a big role in all projects. Kabyldin outlined future priorities in its development plan, which first stresses production, then oil transportation, gas transport, high-valued-added products and, finally, oil and gas services.

Kazakhstan and Azerbaijan extract the most oil in the Caspian region, at over 56 mm and 37 mm tons, respectively. Kabyldin reviewed transport routes for Kazakh crude, which now include the Caspian pipeline, the Atyrau-SamaraKazakhstan-China pipeline (Atasu-Alashankou) as well as the Aktau seaport. Combined capacity is over 60 mm tpy, with up to 80 % of Kazakhstan’s oil sent to Europe.

KMG’s current projects include the Caspian Pipeline Consortium’s expansion project, the creation of the Kazakhstan Caspian Transportation System (capacity of which is expected to reach 67 mm tpy by 2015) and the Kazakhstan-China pipeline. Kabyldin stressed the need for second-phase production at the Kashagan oil field for the viability of the KCTS, which is intended to send rising levels of Kazakh oil from Kashagan and the Tengiz field via the Caspian to the world. He noted that KMG is continuously improving safety and modernizing its transport systems.

With the country focusing on eastward projects, KMG is working with the China National Offshore Oil Corporation on the Kazakhstan-China pipeline to join Kazakhstan’s two stand-alone pipeline systems and allow more crude to be sent to China. The KMG chairman concluded by saying Kazakhstan’s export policy should be flexible and efficient, and that the diversity of routes exemplified this. He said that Kazakhstan wants equitable partnerships with neighbours and international firms, with terms supporting the country’s interests and security.

Angus Miller, Caspian-energy adviser in Britain’s Foreign and Commonwealth Office, said that Britain prioritizes energy security for itself and the European Union and thus attaches great importance to Kazakhstan because of its ‘‘enormous’’ resources. The self-described ‘‘old hand’’ at Kazakhstan is part of a wider advisory group to the British government. The group’s aim, he said, is to ‘‘reduce damaging volatility in the international energy markets and maximize benefits that flow from the development of the region’s natural resources, for the UK, the EU and Kazakhstan.’’

Miller acknowledged the move to use less carbon-based fuel but said there are signs that global demand will rise for decades, especially from emerging nations. He noted the ‘‘twin needs of energy demand and energy security are upper-most in the minds of energy ministers. That is why transparency of action and intent is so important.’’ He praised Kazakhstan for committing to stability and the rule of law in its support for the Extractive Industries Transparency Initiative. Miller concluded by saying, ‘‘Kazakhstan has long been an attractive place in which to invest,’’ and he reminded attendees that Shell and the BG Group were among the first foreign majors in the country.

Rovnag Abdullayev, president of the State Oil Company of the Azerbaijan Republic, outlined SOCAR’s investments and role in energy security. He pointed out that the country now has 31 production-sharing agreements; it has invested more than $ 37 bn into the industry since 1994; and 34 companies from 15 nations work there. Azerbaijan is a major transport hub, and SOCAR ships hydrocarbons to most regional energy centres. He also took special note of planned enhanced cooperation with KMG in oil shipments. After the panel meeting, Abdullayev also stressed that the two nations recently met to discuss another vital security issue: coordinated responses to oil spills and other crises.

Sun Bo, vice president of PetroChina, talked about the changing dynamics of the natural-gas market, with consumption moving from member countries of the Organization for Economic Cooperation and Development to non-OECD countries. He noted that China is the largest natural-gas market in the world, providing an ideal customer for the centre of natural-gas production -- Eurasia. He urged close cooperation and understanding to achieve a win-win situation in terms of energy supply and to promote overall development in Eurasia.

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