Megaprojects Will Not Save UsGalim Khussainov, Director of BRB Invest LLP
How to achieve industry growth in the face of low oil prices
Kazakhstan is one of the largest oil producing countries in the world with a large part of the economy depending on the oil and gas industry, and 50% of the budget revenues is financed by the petroleum industry, which concentrates a considerable amount of manpower. However, for the third year we are witnessing the decline of oil production in the country. If the peak year of 2013 we produced 82 million tons, it is planned to produce 75-77 million tons this year.
But if we look at the practices of other countries, the same OPEC and Russia, on the contrary, they increase the production, which raises issues for the oil production policy in Kazakhstan. Kazakhstan relies mostly on the large fields, such as Tengiz and Karachaganak, which occupy half of the structure of the total volume of oil production in the country. It's a big risk to the State, when one company in the country provides 20% of all revenues to the national budget.
At the same time, we really don't pay attention to the development of small and medium-sized fields. Production at these fields has been steadily falling, although they provide the largest number of jobs and allow to involve the local specialists and service companies with a high degree of local content. After the crisis year of 2015, when oil prices dropped significantly, the existing small and medium-sized companies are facing quite a difficult situation and declining production.
As of now, I would like to determine three categories of problems that exist in the oil industry and impede its further development.
The first problem is the regulation of subsoil use rights. After the entry into force of the Law on subsoil and subsoil use, the situation of the market participant has deteriorated. Coupled with the introduction of a moratorium on the sale of new fields, it has led to a significant reduction in the inflow of investments for development of small and medium-sized accumulations.