World energy leaders talked about energy transition and carbon neutrality
October 4-7 in Nur-Sultan (Republic of Kazakhstan) KAZENERGY Association together with the World Energy Council (WEC) and with the support of the Government of Kazakhstan for the first time held WORLD ENERGY WEEK LIVE 2021 and the XIV Eurasian KAZENERGY Forum.
The theme of the event – Energy for better lives – reflected the desire of the international community for energy security, decarbonization and low-carbon development, as well as the readiness of the countries of the world to confront the difficulties caused by the global crisis jointly.
These days Kazakhstan has acted as an energy bridge between continents and regions. The event emphasized the authority and recognition of the national platform in creating new mechanisms for the development of Kazakhstan and world energy and outlined the potential for international cooperation. These opportunities are incredibly huge with the ability to listen and hear each other.
About 30 events took place on a single platform in Nur-Sultan in online and offline formats for four days, including global sessions and a dialogue of energy leaders, and the presentation of the KAZENERGY-2021 National Energy Report; a conference dedicated to the 25th anniversary of the Caspian Pipeline Consortium – the most significant export project during the years of Kazakhstan's sovereignty; GR-Forum; Forum of the KAZENERGY Women's Energy Club; KAZENERGY Youth Forum, Student Energy Challenge Intellectual Team Competition and StudentDigitalFest competition and others.
Discussions were built around such topical topics as "Leadership: confidence in uncertainty", "Balance between justice, sustainability and security in energy regions", "Energy 2.0: Technology Development and Digital Client", "Fuel of the Future. Regional Perspectives: Asia and the Asia-Pacific region", "Central Asian Energy: New National Initiatives and Partnerships", "Energy Transition and Competition for Resources", "Critical Stages and Transformation by 2040", "Petrochemistry: Technological Trends and Competencies", "Carbon Neutrality and Sustainable Energy: new opportunities for Kazakhstan". Conversations of Energy Leaders were held in the course of constructive discussions. Four days of dynamic discussions and nothing unproductive.
Energy trilemma or how to achieve balance?
The past year has shown how fragile our world is. Despite the pandemic, national economies have largely coped with the most difficult challenge in history. The energy transition is not the future but the present. For many countries, especially with the commodity-heavy economy, it is sometimes painful, risky, and with its harsh rhetoric. But it is inevitable. It is impossible to ignore this trend.
Today, global energy demand is increasing along with population growth and its standard of living. Moreover, demand is growing so fast that our planet's fragile ecosystem can no longer cope with the negative effect of energy. Tremendous joint efforts are required to prevent common climate threats.
In the process of developing the energy system in the coming decades, hydrocarbons will continue to play a vital role, being raw materials for transport, petrochemical industries, and other industries. The world cannot abandon oil and gas overnight, immediately and completely replacing them with alternative energy sources such as the sun, wind, water and the atom. But to successfully resist climate change, we can and must learn how to get energy from environmentally friendly sources.
Ingenuity, new technologies and innovations will help us make traditional energy carriers greener and actively develop low-carbon energy. The crisis of 2020 accelerated the energy transition of oil and gas companies, which revised their strategies to reduce the carbon footprint through the development of renewable energy (RE) projects and decarbonization. Against this background, there has been an even steeper reversal from the traditional requirements to produce and supply energy resources at a low price to solving the problems of environmental friendliness and reliability of such supplies.
At the same time, the inseparable principles of the Energy Trilemma developed by the World Energy Council come to the fore – energy security, access to energy and environmental sustainability. Only compliance by the countries of the world with all three vectors will make it possible to create clean, low-carbon energy, expand the share of alternative energy sources, reduce greenhouse gas emissions, which will ensure balance and help preserve the planet.
This, in particular, was discussed during the global plenary session "The World Energy Trilemma of 2021 – Balance between dimensions: Managing changes in energy geographical regions", which was moderated by the Secretary-General of the World Energy Council Angela Wilkinson.
For Kazakhstan, which is one of the largest producer and exporter of oil and gas to world markets, the change of the global paradigm, on the one hand, called into question the possibility of further hydrocarbon exports increase, which is the basis of the economic model, and on the other hand, allowed to unlock the potential of those energy niches that the country had not even thought about until recently. This refers to developing the potential of hydrogen energy, the LNG segment, and coal chemistry. The country will achieve green development and new economic growth by generating traditional and alternative, including innovative energy.
As the President of the Republic of Kazakhstan, Kassym-Jomart Tokayev, stated in his video message opening the session, Kazakhstan is already one of the leaders of all these new processes in the world and strives to achieve carbon neutrality following global trends by 2060. As known, the country was one of the first in the world to join the Paris Climate Agreement to reduce greenhouse gas emissions. The first of the Eurasian Economic Union (EurAsEC) countries announced plans to introduce cross-border carbon regulation, similar to the EU, and created an exchange for trading CO2 emissions. The country is a participant in international programs and agreements on these initiatives. A draft of its own roadmap has been developed. The Kazakhstan-2050 Strategy and the Concept of transition to a green economy are being successfully implemented, investments in new low-carbon projects are being attracted.
"I have instructed the government to increase the share of renewable and alternative energy sources in electricity generation to 15% by 2030. To date, about 2,000 MW of renewable energy sources have been put into operation. Kazakhstan is on the way to its goal. However, commitment to renewable energy sources alone is not enough to achieve carbon neutrality," the Head of state said.
In addition, Kazakhstan is currently actively developing the Low-carbon Development Concept until 2050, which will be approved in the near future, providing for deep decarbonization measures. Additionally, the issue of introducing an internal carbon tax on energy consumption, import and export carbon duties, and the creation of a Carbon Fund is being worked out. All this will avoid the full payment of the border carbon tax in the EU and direct the funds received from the carbon tax to implement climate projects to achieve the goal of deep decarbonization of the economy. It will also be a significant contribution of Kazakhstan to ensuring global energy transition and achieving the goals of the new climate policy.
Minister of Energy of Kazakhstan, Magzum Mirzagaliyev, noted that Kazakhstan, which has a significant hydrocarbon potential, has been demonstrating stable growth in oil and gas production and supplies to world markets for many years and at the same time is fully committed to observing the principles of energy transition and energy trilemma, which have become the main ones on the international energy agenda. Summarizing his speech, it can be noted that the measures implemented in the country to improve indicators in the energy sector demonstrate the effectiveness of energy source management, reliability and sustainability of the existing energy infrastructure, and are also the country's contribution to ensuring global and national energy security.
Speaking at the session, Angela Wilkinson highly appreciated Kazakhstan's contribution to the implementation of the climate agreement goals, energy transition, and the energy trilemma. The Head of the WEC expressed hope that the world will see some of the results of the measures taken already in October 2022 at the 25th World Energy Congress, which will be held in St. Petersburg.
Global challenges for energy and the regional context
The satisfaction of humanity's needs for clean energy should be carried out without prejudice to the people themselves and the ecosystem. In their reports, the participants of WORLD ENERGY WEEK LIVE 2021 and the XIV Eurasian KAZENERGY Forum noted that this is the only way the world energy market will fit into a new transformation in the era of global challenges. And regional markets will become the main bridges in this transition, as their role increases significantly and becomes dominant for the successful and speedy provision of the entire process.
In particular, this idea was fundamental during the "Central Asian Energy: New National Initiatives and Partnerships" session, organized under the chairmanship of Urban Rusnák, Secretary-General of the International Energy Charter (IEC) and moderated by Ruslan Galkanov, Head of the IEC Transit Unit. Its participants demonstrated the potential of the Central Asian countries partnership in developing energy projects to improve energy security.
Over the past decade, the countries of Central Asia – Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan and Kyrgyzstan have demonstrated significant economic growth. The GDP growth rates of the countries of the region, on average, amounted to about 5%. However, during periods of falling oil and natural gas prices and a reduction in the volume of remittances of migrant workers, the region faced a cyclical slowdown in growth rates. During the current crisis caused by the Covid-19 pandemic, the region is also experiencing an economic downturn. To maintain economic growth and reduce poverty during the recovery period after the end of the pandemic, the region needs new economic growth drivers that will diversify economies with a reduction in dependence on raw material rents and remittances, optimize the use of natural resources, and stimulate economic development with the leading role of the private sector.
As the session participants emphasized, strengthening the integration of the region's economies by increasing the volume of energy trade between the countries of Central Asia and with neighbouring regions can help restore and maintain economic growth and regional cooperation. To date, the Central Asian states have significant natural energy resources –Tajikistan and Kyrgyzstan have great potential in the field of hydropower, while Kazakhstan, Turkmenistan and Uzbekistan have large reserves of coal, natural gas and oil. The region also has tremendous untapped potential in the field of solar and wind energy. The development of these resources can become part of programs led by individual countries for the development and transition to clean energy sources.
Vice-Minister of Energy of Kazakhstan, Asset Magauov, suggested that the countries of the region coordinate efforts to develop the existing potential of the gas chemical industry, which, in turn, will expand export opportunities and occupy its niche in the world market. At the same time, he stated the need to increase the efficiency of resource production by processing it with the release of goods with high added value. In addition, the Kazakhstani Vice-Minister pointed to additional opportunities for deepening cooperation and implementing large-scale joint infrastructure projects, such as the expansion of railway and port facilities, the construction of interstate power lines and pipelines.
As known, the Central Asian countries connect the largest gas pipelines, in particular, the Central Asia - Center gas pipeline that was laid through the territories of Turkmenistan, Uzbekistan and Kazakhstan in the direction of Russia back in Soviet times. In addition, the Central Asia - China gas pipeline (Turkmenistan – Uzbekistan – Kazakhstan – China) has been laid from Turkmenistan in the direction of China. Kazakhstan is also united with Kyrgyzstan and Uzbekistan by the Bukhara Gas-Bearing Province – Tashkent – Bishkek – Almaty gas pipeline. Thus, the economies of our countries are closely intertwined and interconnected with each other. "We must direct all our efforts to preserve the existing potential and strengthen trade and economic relations in fuel and energy complex between our countries," Mr Magauov said.
He called joint work on the development of RE one of the critical areas of cooperation, which will allow achieving the goals of the Paris Agreement, to which Kazakhstan joined one of the first in the world. "For us, this direction is not a fashion trend. It is a necessary condition for the further development of the energy industry. Kazakhstan follows its goals within the Concept of a green economy framework and has reached 3% of the share of RE in the country's total energy balance. We intend to increase the share of renewable energy to 6% by 2025, 15% by 2030 and at least half by 2050. One of the main criteria for the development of the industry is a strong legislative and institutional framework. Thereby, for the first time since independence, an auction mechanism has been introduced in Kazakhstan, significantly increasing the volume of investments in renewable energy projects. The auction showed great interest from both Kazakhstani and international participants," Asset Magauov informed.
Future energy and national energy trends
A separate gas session, "The role of gas in the energy balance in Russia and Kazakhstan", was organized by the KAZENERGY Association together with the X St. Petersburg International Gas Forum to once again proclaim the unique role of gas as the cheapest and most affordable type of energy in ensuring energy security in the world.
Mikhail Smirnov, President of the EnergoInnovatsia Russian Association of Innovative Enterprises in the Energy Sector, who acted as moderator, stressed the importance of long-term and effective cooperation between Kazakhstan and Russia in all sectors, including gas. Calling Kazakhstan "without exaggeration, one of the most dynamically developing countries globally," he expressed confidence that both Kazakhstan and Russia, as raw material countries, are quite capable of coping with global challenges. In particular, the record increase in gas prices in recent months, in his opinion, opens up new prospects for both gas-producing countries. Thus, on October 6, 2021, on the day of the gas session of the forum, the cost of one thousand cubic meters of gas at the opening of trading in Europe rose to 1,900 US dollars, updating the record high, which experts explained by mistakes in the actions of the European Commission in terms of green policy.
On the same day, the President of the Russian Federation, Vladimir Putin, said that due to speculation on climate problems and a reduction in investment in the extractive industry, an absolute hysteria and confusion arose in the energy markets of Europe, which led to such consequences. In this regard, all participants of the session in Nur-Sultan agreed that the green rhetoric should be smoother to avoid such situations.
First Vice-Minister of Energy of the Republic of Kazakhstan, Murat Zhurebekov, speaking about the record increase in gas prices in Europe, noted that this demonstrates the demand for this type of fuel by consumers, not only in Europe but also in Asia, where growing demand also supports the cost. "This suggests that gas can and should compete with other environmentally friendly energy sources in the structure of the energy balance of the world," he said.
According to the Kazakhstani Ministry of Energy forecasts, in the near future, gas consumption in the country will grow and reach 25.7 bln cubic meters by 2025 and 30.2 bln cubic meters by 2030. Later, speaking at the "Oil and gas Chemistry: technological trends and competencies" session, organized by KAZENERGY together with the Association of Producers and Consumers of Petrochemical Products, Murat Zhurebekov noted that the future of the petrochemical industry in Kazakhstan seems promising, which is explained by the growing demand for the industry's products – after passing the fourth redistribution, according to him, the cost of final products increases 15 times. According to the Vice-Minister, due to the need to develop this segment, there is a need to expand the resource base. By the end of 2020, the volume of petrochemical production in Kazakhstan has grown to 360 thousand tons. There is potential for a significant increase in this indicator – up to 2 million tons per year by 2025.
According to Dmitry Makeev, Director of the Oil Refining and Petrochemistry Department of KazMunayGas, the planned commissioning of the first stage of the gas chemical complex in the Atyrau region will be a significant contribution to the development of petrochemistry in the country. The mechanical completion of all works will occur in the fourth quarter of 2021 and the commissioning of the facility in March 2022.
Chairman of the Energy Committee of the State Duma of the Russian Federation, President of the Russian Gas Society Pavel Zavalny sees great prospects in developing integration initiatives to create a single gas market in the EurAsEC by 2025. Abzal Kismetov, Deputy General Director of Intergas Central Asia JSC, added that now the governments of the countries participating in this process are working on unifying the legislative framework and technical regulations in the gas industry, where the role of the state-owned KazTransGas JSC is increasing in Kazakhstan. In this regard, Mikhail Smirnov mentioned the current process of forming KazTransGas as an independent structure separate from KazMunayGas and wished good luck to the Kazakhstani side.
As for the national company itself, Dastan Abdulgafarov, Deputy Chairman of the Board for Strategy, Investment and Business Development of KazMunayGas, said during the "Carbon neutrality and Energy for the benefit of humanity: new opportunities for Kazakhstan" session, they started developing a corporate program of low-carbon development until 2031 with the setting of target indicators, identifying key measures to achieve them and exploring the possibilities of using decarbonization technologies on their production assets. Now, according to him, KMG accounts for 2.5% of all emissions in Kazakhstan. But, thanks to the implementation of energy efficiency and RE projects, a significant reduction in this indicator will be ensured.
In September 2021, KazMunayGas and Shell Kazakhstan B.V. signed a Memorandum of Cooperation in developing Carbon Capture, Utilization and Storage (CCUS) technology. The document provides for joint exploration of potential opportunities to implement the CCUS Pilot Project, seeking to identify and develop the main criteria for carbon capture and utilization. The experience gained will be scaled to all KMG subsidiaries. In addition, the national company is studying the possibility of creating a research centre for hydrogen projects in its structure. As part of this activity, a pilot project for hydrogen production is planned to be put into operation at one of the major Kazakhstani refineries in 2021.
Speaking about Shell's role in the decarbonization process, German Burmeister, Senior Vice-President and Chairman of Shell Kazakhstan B.V., said that the company's investment portfolio in Kazakhstan has several competitive assets in this area, and in partnership with KazMunayGas, it will achieve even greater success. He called the "Solar energy for schools" joint program with Nazarbayev University one of Kazakhstan's most interesting and compelling projects.
Mohammad Abdelkader el-Ramahi, Director of Asset Management and Technical Services at MASDAR from the UAE, offered to use the experience of developing the renewable energy segment. For this company, wind energy is seen as the most promising area of cooperation with Kazakhstan. Moreover, interesting opportunities are opening up for the construction of wind turbines in locations with high wind strength and speed and installing coastal wind farms in the Caspian Sea.
And the Managing Director of ExxonMobil Kazakhstan, Dinesh Sivasambu, highly appreciating the efforts of large oil and gas companies operating in the Tengiz and Kashagan fields to reduce gas flaring, promised support to Kazakhstan in decarbonization issues. "We can offer progressive and understandable policies. You can start with the emissions system from the companies themselves. This system should be verified with the EU system," he said.
Revealing the topic of hydrogen energy use in more detail, Konstantin Nazarov, Air Products Director for Strategic Development in the CIS and Eastern Europe, raised the issues of the formation and storage of carbon dioxide, which is obtained during the production of hydrogen. The speaker asked questions – where will it be stored, who will pay for it, and also how to deliver hydrogen to the place of its use so that it remains green? After all, as known, hydrogen is considered both as an energy carrier and as a means of accumulating excess electricity generated by RE during periods of active sun and wind, when its production exceeds consumer demand.
Reliable export route for energy security
Against the background of discussions on ensuring energy transition and achieving the goals of the climate agenda on the sidelines of WORLD ENERGY WEEK LIVE 2021 and the XIV Eurasian KAZENERGY Forum, the issue of energy security on a global and regional scale has been raised more than once. The "CPC – Kazakhstan's Main Export Route" session dedicated to the 25th anniversary of the Caspian Pipeline Consortium, which outlined the vectors of reliability and stability of crude oil supplies to meet current and future demand from global consumers, emphasized the importance of developing energy exports.
To date, CPC is the largest international oil transportation project with the participation of Kazakhstan, Russia, and the world's leading production companies. From 2001 to 2021, over 745 mln tons of oil were delivered to world markets through the Tengiz-Novorossiysk oil pipeline system. Of these, more than 650 mln tons are oil from Kazakhstan, and about 95 mln tons of oil are produced in Russia.
According to Kairgeldy Kabyldin, CPC-K JSC Deputy Director General for Relations with the Government of Kazakhstan, who was at the origins of the creation of Kazakhstan's oil pipeline system, at the dawn of independence, the CPC project was selected from an extensive list of routes for transporting Kazakhstani oil by conducting a thorough analysis and taking into account all transit risks and geopolitical interests of Kazakhstan. A major role in choosing this particular route was played by the comprehensive support of the project from the first President of Kazakhstan, Nursultan Nazarbayev, and the President of Russia, Boris Yeltsin.
Highly appreciating the role of CPC in strengthening energy security, Minister of Energy of Kazakhstan, Magzum Mirzagaliyev, noted: "Today the project is a vivid example of successful multilateral cooperation. Running through the territories of Kazakhstan and Russia, connecting the two sea coasts of the Caspian and Black Seas, it brought together a large number of shareholders from the UK, Italy, USA, Russia and Kazakhstan."
According to CPC General Director Nikolay Gorban, the successful implementation of the project allowed creating a favourable investment climate for the dynamic development of the primary driver of Kazakhstan's economy – the oil industry, and contributing to the development of all regions of CPC's presence in Russia and Kazakhstan. He recalled that in June 2019, CPC launched a Debottlenecking Program, which will optimize the transportation process and obtain additional capacity for oil pumping. In Kazakhstan, an essential stage of this work will be the modernization of pumps and all auxiliary systems at the Tengiz PS. After completing the work under this program, CPC will be able to pump up to 72.5 mln tons of oil per year from Kazakhstan with optimized use of anti-friction additives and up to 83 mln tons of oil per year together with raw materials from Russian shippers.
Nikolay Gorban informed that in 2020, due to stable financial indicators, CPC paid the last part of the debt equal to 990 mln US dollars to shareholders ahead of schedule. Due to the full repayment of the debt owed to the company's shareholders, paying dividends on CPC shares has also become possible this year. Thus, on June 10, based on the decision of the Board of Directors, CPC, for the first time in its history, made the first tranche of dividend payments to the company's shareholders for the Q4 2020 and the Q1 2021. The total amount of dividends for the specified period is $665 mln. CPC shareholders received $548 million in the first tranche.
"Over the past 25 years of its creation and operation, the Consortium has proved the correctness of the decisions taken in 1996 by the leadership of Kazakhstan, Russia and major foreign oil companies. Among several routes of oil transportation from the country for export, which were considered at the dawn of the formation of national independence, the Tengiz-Novorossiysk oil pipeline project was the right decision, which, as we see, has been confirmed by time. Being an international project that for the first time provided direct access of Kazakhstan's energy resources to world markets, over the past quarter of a century, CPC has gained and strengthened its reputation as a reliable and profitable multilateral enterprise in many respects," the CPC CEO said.
During the session, its participants noted that the Tengiz-Atyrau-Novorossiysk port route is the most profitable and safe for the export of Kazakhstani oil. In addition, as emphasized by Kairgeldy Kabyldin, today, it is also the only oil pipeline in the CIS where the oil quality bank operates.
According to Kevin Lyon, General Director of Tengizchevroil LLP, CPC's investments in expanding the pipeline's capacity allowed for the export of 100% of TCO's oil production through the pipeline to international markets. At the same time, about 45% of CPC volumes come from TCO. During this time, TCO had stable access and a safe and reliable transportation system for its products.
Deputy Managing Director of NCOC, Yermek Marabayev, pointed to the increasing volumes of oil pumping from the Kashagan field through this system, which increased from 137 thous. tons in 2016, when transportation via CPC started, to more than 15 mln tons in 2021. And Kuanysh Kudaibergenov, Deputy General Director of the KPO Consortium, noted that over the past 17 years, the export of Karachaganak liquid hydrocarbons through CPC has grown from 3.5 mln tons in 2004 to a record 10.6 mln tons in 2020. Since the beginning of the export of Karachaganak oil, the number of shipments of KPO at the Yuzhnaya Ozereevka CPC Marine Terminal has reached an average of 120 per year. "CPC's investments in the Expansion Project and other ongoing projects are a guarantee that companies producing oil in the region, including KPO, will continue to be able to supply this oil," he added.
Summing up the results of WORLD ENERGY WEEK LIVE 2021, Chairman of the World Energy Council Jean-Marie Dauger noted that measures to implement the global energy transition and improve climate indicators initiated by progressive countries of the world would not give the desired result right away. But the systematic movement will bring us closer to these goals. "The consequences of doing nothing will be catastrophic. The time for action is not tomorrow, but now," he said.
At the same time, the Head of the WEC spoke in favour of developing tools to measure the effectiveness of the measures applied and for further maintaining and strengthening the dialogue– which, according to Jean-Marie Dauger, is extremely important for the integration of all national initiatives.
The Chairman of the World Energy Council praised the event's organization in Nur-Sultan, noting that "many people were probably impressed by Kazakhstan's ambitions in implementing climate policy and the concrete steps taken in this direction." He expressed hope that the results of the discussions held in Kazakhstan will be strengthened in the future. Some interim results may be announced at the 25th World Energy Congress in a year, which the WEC will organize in St. Petersburg in October 2022.
In general, the work of WORLD ENERGY WEEK LIVE 2021 and the XIV Eurasian KAZENERGY Forum showed that, although there is no universal solution for efficient and risk-free energy transfer in the world today, the countries of the world are ready to conduct an open and productive dialogue on this topic.