Results of the Year
CNPC In Kazakhstan: Reliable Partner and Important Investor
Xi Jinping’s visit to Kazakhstan (September 2022)The year 2022 was marked by a landmark event in the energy industry – the 25th anniversary of oil and gas cooperation between Kazakhstan and China. It was successfully launched in 1997 with the arrival of the China National Petroleum Corporation (CNPC) in the Kazakhstan market. It is a well-known international integrated energy company, one of the three leaders of the world's oil giants, conducting oil and gas operations in 38 countries.
CNPC's 25-year cooperation with Kazakhstan is called strategic and mutually beneficial. So, what is the mutual benefit? What benefits did the company from China bring to the Kazakhstani economy? What valuable things have Chinese enterprises done for ordinary Kazakhstanis? These questions primarily arise among our compatriots regarding the presence of a company from China in subsoil use. So, let's try to answer them.
INVESTMENT
Pipeline constructionIn 1997, CNPC acquired the shares of Aktobemunaygas. At the time, investors faced several problems, such as debts on taxes, loans, and salaries, loss of logistics channels, and outdated and worn-out equipment.
After a thorough analysis, Chinese managers purchased the latest equipment and increased the volume of hydrocarbon production due to the extensive involvement of scientific research. It took a lot of time and finances, but as a result, CNPC-Aktobemunaygas JSC turned from unprofitable into one of the most successful entities. For a quarter of a century, the amount of investments in the Aktobe project exceeded $10.5 billion. However, under the terms of the contract with the Government of Kazakhstan, it was enough for the Chinese corporation to invest four billion dollars.
In addition, thanks to CNPC investments, new plants and oil and gas pipelines have appeared in Kazakhstan, new fields have been discovered, and an oil refinery has been modernized. As a result, the country began to earn money on the transportation and transit of hydrocarbons. The pipeline system allows oil pumping from the western regions to the south and north, providing gas to residents of remote villages and exporting raw materials.
Over 25 years, CNPC has invested more than $45 billion in the development of Kazakhstan's oil and gas complex and paid another $50 billion in taxes. More than 30 thousand people work at enterprises with CNPC participation, 98% of whom are citizens of Kazakhstan.
EXPLORATION AND PRODUCTION
CNPC-AktobeMunaiGas JSCOne of the most successful projects in this field is CNPC-Aktobemunaygas JSC. It is the industrial leader of the Aktobe region. Over 25 years, the company has produced over 150 million tons of oil and about 90 billion cubic meters of gas. The amount of taxes paid exceeded $12 billion.
Chinese investors have financed several important and socially significant projects. Among them is the construction of a new oil and gas processing complex and a gas pipeline, which made it possible to gasify remote villages of the Aktobe region. Thanks to the introduction of innovative technologies, the first largest onshore oil field was discovered after Kazakhstan gained independence – Severnaya Truva, with initial reserves of 100 million tons. The company has built 72 kilometers of the Zhanazhol-Emba railway, which is used not only for the transportation of shift workers but also for the region's needs. More than 6 thousand people work at the company's facilities.
Mangistaumunaigas, another CNPC joint venture, is widely known in the Mangistau region. It provides more than a third of all oil production in the region and about 8% in the country, consistently ranking among the top three in the rating of the largest taxpayers in Kazakhstan.
In the Kyzylorda region, CNPC participates in the PetroKazakhstan Kumkol Resources project. It is an oil-producing company whose activities include geological exploration, field development, oil and gas production, and processing and sale of oil and petroleum products.
CNPC also participates in the development of the Kashagan offshore field as part of the North Caspian Operating Company consortium.
At the same time, CNPC enterprises supply the main part of produced oil (about 65%) to the domestic market. Economically, it is not profitable since the export price is much higher. No other foreign investor in the oil and gas sector does this.
TRANSPORTATION
Production modernizationTransport infrastructure is integral to the oil and gas cooperation between Kazakhstan and China. Together with Kazakhstani partners, CNPC has created a whole network of pipelines of enormous importance for meeting Kazakhstan's domestic oil and gas needs and exporting raw materials to China. During the cooperation, 165 million tons of oil and 430 billion cubic meters of gas were exported to China through Kazakh-Chinese trunk pipelines.
The Kazakhstan–China oil pipeline has become an ambitious project in this field. It operates the Kenkiyak-Kumkol and Atasu-Alashankou oil trunk pipelines. This project solved a crucial strategic task of Kazakhstan to transport raw materials from the western region to the Pavlodar and Shymkent refineries and the promising Chinese market.
The Kazakhstan-China gas pipeline is the first project in Kazakhstan's gas industry aimed at developing the country's transit potential and diversifying natural gas supplies. The project aims to ensure the transit of Turkmen and Uzbek gas to China, the export of Kazakhstani gas to China, and the uninterrupted supply of gas to the southern regions of Kazakhstan.
The Beineu-Bozoy-Shymkent gas pipeline connects the western fields with the southern regions, providing them with domestic natural gas. Before its construction, fuel was supplied to the country's south from Uzbekistan, and its price was much higher. This is the largest pipeline project in the history of independent Kazakhstan. CNPC and the QazaqGaz National Company manage it.
- I believe such projects demonstrate the success story of strategic cooperation between QazaqGaz and CNPC. I am sure that the reforms we are making on gas pricing will be unprecedented for the entire gas industry, will increase profitability and the prospects of the gas industry, and we see the great interest of CNPC," says Sanzhar Zharkeshov, Chairman of the Board of the QazaqGaz National Company.
REFINING AND SALES
Shymkent RefineryShymkent Oil Refinery underwent a large-scale modernization in 2018. The company's shareholders – CNPC and the KazMunayGas National Company – invested about two billion dollars in its implementation. Since then, the plant has been producing high-quality products of the Euro-4/Euro-5 standard, and the capacity has been increased to 6 million tons per year.
- Shymkent refinery is successfully managed jointly with Chinese partners and significantly contributes to Kazakhstan's energy security. Our companies are linked by long-term and fruitful cooperation, which substantially contributes to the development of the economies of both countries and strengthens mutual understanding between our people. It is gratifying for us that CNPC is actively implementing its competencies and experience in Kazakhstan," said Magzum Mirzagaliyev, Chairman of the Board of the KazMunayGas National Company.
As a matter of fact, last year, all three refineries in Kazakhstan processed 16.05 mln tons of crude oil, of which more than half, namely 8.43 mln tons (or 52.5%), were supplied by CNPC. All manufactured products such as gasoline, diesel fuel, jet fuel, and liquefied gas are sold on the domestic market of Kazakhstan.
CNPC is also the founder of a well–known supplier of high-quality petroleum products – SINOOIL, which has an extensive network of gas stations, branches, and subsidiaries in major cities.
SOCIAL PROJECTS
In Astana, CNPC Group financed the construction of the Kazakh National Academy of Choreography and the five-star Beijing Palace Hotel. The famous Arts Center in Aktobe became a gift for residents of the western region. In Almaty, there is the CNPC-Kazakhstan Table Tennis Federation sports complex, in which athletes from all regions are engaged under the mentorship of a titled coach from China.
During the coronavirus pandemic, CNPC Group purchased mobile ICUs, medicines, and medical equipment for Kazakhstan's regions. Over 25 years, CNPC has invested more than $410 million in social projects.
Thus, the Chinese National Oil and Gas Corporation participates in almost entire Kazakhstan's oil and gas industry chain. Its presence can be called a mutually beneficial, strategic, and long-term partnership. There is an increase in the level of the economy, transformations in the oil and gas industry, the development of the social sphere, and the strengthening of friendly relations between Kazakhstan and China.
Congratulating the CNPC team on the 25th anniversary of its activities in the country, President of Kazakhstan Kassym-Jomart Tokayev noted the vital role of the corporation in developing multilateral cooperation between the two countries.
"CNPC contributes significantly to the production and processing of hydrocarbons in our country. As a result of close-knit and professional work, the company's many thousands of employees are achieving great success in Kazakhstan. I am confident that together we will contribute to the prosperity of Kazakhstan's oil and gas industry and expand the scope of our cooperation," the Head of State wrote in a congratulatory letter.
A lot was said about the global partnership between Kazakhstan and China during the meeting of the leaders of both countries in September this year. Xi Jinping's visit to Astana on the 30th anniversary of the establishment of Kazakh-Chinese diplomatic relations is a historic and landmark event in world politics. The President of the People's Republic of China traveled outside China for the first time since the beginning of the coronavirus pandemic and visited Kazakhstan first of all. During the extended talks, the countries' leaders adopted a Joint Statement opening a new "golden 30th anniversary" of bilateral relations in the spirit of the previously declared eternal comprehensive strategic partnership.
Of course, the oil and gas sector is the most critical link in building mutually beneficial economic cooperation between the two countries. The Chinese National Oil and Gas Corporation in Kazakhstan will continue its course aimed at improving the welfare of both countries, strengthening friendship and mutual trust, and fulfilling the tasks set by the heads of Kazakhstan and China.
The CNPC leadership in Kazakhstan and Central Asia congratulates the people of Kazakhstan on Independence Day and the upcoming New Year and wishes everyone good health, prosperity, and peace.