Geological Exploration: Addressing a Sea of Questions - Part 2
1. Introduction: Embracing the Help of Google
The Earth and its abundant resources empower the people of Kazakhstan with a confidence in their future. However, the assurance doesn't only lie in the abundance of these resources, but also in their judicious utilization. Examples of both effective and ineffective resource management can be found not only within our country but also abroad. Importantly, an amendment to our nation's Constitution states: the land and its subsoil, waters, flora and fauna, and other natural resources belong to the people. The state exercises property rights on behalf of the people. The land can also be privately owned, based on the grounds, conditions, and limits set by law.
In February of 1956, the Ministry of Geology and Subsoil Protection of the Kazakh SSR was established, recognizing the importance and value of Kazakhstan's subsoil. Since then, there has been an intensified effort to search for and explore deposits. Coordinated efforts have significantly enhanced the country's mineral resource base and led to new discoveries, including the Tengiz oil field, Karachaganak gas condensate field, Bozashinsky and South Turgay oil and gas regions, among others.
Following its declaration of independence, the Republic of Kazakhstan began vigorously developing its own economy. The mineral resource base, built through the hard work of Soviet geologists, became a primary source of budgetary funds, and remains so to this day. Regrettably, during this period, the nation's geological sector did not receive the attention it warranted, neither in terms of addressing issues related to replenishing reserves and enhancing the mineral resource base nor in developing its foundational and other applied directions. Even in current policy documents, geology is somewhat sidelined. However, instead of dwelling on these challenges, let's shift our focus to our hydrocarbons, or more precisely, to the history of our country's oil sector.
Kazakhstan's oil and gas sector boasts a rich history spanning over 120 years. This period can be broadly divided into three stages.
The first stage was marked by oil extraction in Emba. From 1899 to 1914, over 420,000 tons of oil were extracted in Emba. The First World War and revolutionary events in Russia led to stagnation in the oilfields. By the time of the nationalization of the oilfields in 1920, many oilfield facilities had been damaged and rendered inoperative. This low point signifies the end of the first stage.
The second phase (1921-1991) commenced with the reconstruction of devastated oil fields and their nationalization. The era was marked by the following pivotal events:
- In 1946, the Atyrau Refinery began operations.
- By 1950, oil production reached 1 million tons.
- In the 1960s, the first Mangyshlak oil fountain was discovered at Zhetibai; the first Ural-Volga field at Martushi was commissioned, and oil production exceeded 10 mln tons annually.
- The 1970s saw the introduction of the Oktyabrskoye field in the Aktobe region.
- In 1978, the Pavlodar Refinery commenced operations.
- The 1980s marked the commissioning of the Tengiz field, the Karachaganak gas condensate field, and the discovery of the major Zhanazhol gas condensate field.
- In 1985, the Shymkent Refinery started operations, and oil production surged to 25 mln tons annually.
- Throughout this time, Kazakhstan emerged as the Union's second-largest oil province, with all oil production being managed centrally.
The third phase began with the establishment of an entity overseeing the oil and gas industry of an independent Kazakhstan. At this juncture, the industry included oil and gas production associations, oil and gas processing enterprises, oil and gas transport, and other related entities. Events in the oil and gas sector indicate that, during the 1990s and the onset of the new millennium, Kazakhstan's development in some aspects mirrored the trajectories of many other oil-producing nations.
Upon gaining independence, despite a century-long history of oil extraction, the oil and gas sector was only beginning to attract serious investments and establish its presence on international markets. It became evident that without foreign investments and technology, further industry development would likely be unattainable. Consequently, a priority was to attract foreign companies, leading to the swift development of a regulatory framework.
During these years, the initial agreements between Kazakhstan and several multinational corporations marked the first steps in opening up Kazakhstan's oil and gas sector to foreign investors. As a result of various industry reforms, such as privatizations, establishment of national companies, joint ventures, and more, along with the creation of favorable investment conditions, companies from Russia, the US, Italy, Japan, the UK, and Hungary entered the country. After navigating a phase characterized by significant geological risks and progressing to consistent commercial reserve discoveries, such as the Kashagan discovery and the expansion of the Tengiz reserves, Kazakhstan implemented policies to strengthen the state's role in the oil sector. Moreover, a dominant trend in the sector's development at this stage was the expansion of hydrocarbon delivery transport routes to consumers.
Thus, as Kazakhstan embarked on its new historical chapter as an independent nation, it began by attracting foreign investments and technologies. This followed significant successes associated with the development of the Tengiz and Karachaganak fields, the implementation of the CPC project, and the discovery of the colossal Kashagan field. Kazakhstan's subsequent strategic objectives include striking a balance between state and investor interests and venturing into new promising sales markets. These goals might very well dictate the future development of the oil and gas sector.
2. Science: The Key to Success
I'd like to begin by sharing a reflection from Jacque Fresco “In the prime of my youth, in New York City, I set up a lab in my room and began studying natural science and other disciplines. It dawned on me that the universe follows certain laws, and both individuals and society at large are no exceptions to these. Then, in 1929, the stock market crashed, marking the beginning of what we now refer to as the Great Depression. I couldn't fathom why millions were jobless, homeless, and starving, while factories sat idle and resources remained plentiful. It was at that moment I realized that the fundamental rules of the economic game were flawed. Not long after, World War II began, and countries consecutively destroyed one another. After the war, I calculated that the resources spent on destruction could have easily provided for every individual on Earth. Since then, I've observed humanity's self-sabotaging path, the constant squandering and annihilation of invaluable finite resources in the name of profit and free market. I've watched as societal values were reduced to artificial materialism and mindless consumption, and how financial forces dictate the political system of a supposedly free society. Now, at 94, my perspective remains unchanged from 75 years ago. This madness must end.” (Source: https://ru.citaty.net/tsitaty-...).
So, what exactly is geology? A cursory search using Google offers an explanation: Geology, stemming from ancient Greek words for "Earth" and "study," encompasses the sciences related to the structure of Earth, its origin, and evolution. It's based on studying geological processes, the composition of matter, the Earth's crust, and the lithosphere using every available method, integrating information from various sciences and disciplines. Simply put, geology is the study of Earth's composition, structure, and its developmental patterns over time.
Geology has undergone a complex evolution, expanding its research scope to include the entirety of Earth and celestial bodies within our Solar System. In geology, the subjects of study are geological entities, their properties, structural patterns, spatial relationships, origins, and evolution across time and space.
Shifting our focus to oil and gas: these primarily serve as economical energy sources. Fuel, in fact, is the bedrock of energy, industry, agriculture, and transportation. It's fair to say that life, as we know it today, would be inconceivable without fuel. In the global energy balance, oil accounts for about 40%. A significant portion of it fuels transportation, especially cars and planes. Additionally, it holds a substantial role in technological consumption, notably in ferrous metallurgy and heating needs.
With the advancement of the chemical industry, petroleum and natural gas are increasingly utilized as key chemical raw materials. They now serve as the source for a wide array of chemical and pharmaceutical products including synthetic fibers, plastics, organic acids, gasoline, alcohols, synthetic solvents, and much more.
The oil and gas sector in Kazakhstan stands as one of its leading industries, shaping the nation's present condition and the prospects for its socio-economic development. This sector drives the production of the Gross Domestic Product, industrial outputs, consolidated budget revenues, exports, and foreign currency earnings.
However, the current state of this sector raises serious concerns. The national economy predominantly thrives on its resource-rich sectors. Presently, natural resources account for a significant portion of the nation's revenues. Yet, Kazakhstan’s share in the global market for high-tech products stands at zero. In lists of countries that have shown dynamic growth over recent decades, there are scarcely any raw material exporters, but predominantly nations excelling in high-tech innovations.
The present state of the hydrocarbon raw mineral resource base is marked by a decline in identified oil and gas reserves, coupled with a slow rate of their replenishment. The volume of geological exploration activities does not support the sustainable development of the mineral resource base of the oil and gas industry. This, especially considering rapid oil extraction growth, could pose a serious threat to the nation's energy and economic security in the long run.
The composition of identified oil reserves continues to deteriorate. There's a precedent in the accelerated extraction of the most profitable sections of deposits and layers. Newly identified reserves are primarily located in medium and small-sized fields, with a large portion being hard-to-extract. Their commercial viability largely depends on global market prices of oil. Overall, hard-to-extract reserves make up over half of the country's identified stocks.
Experts predict that if major new oil fields aren't discovered and developed soon, the nation's oil production will swiftly decline, barring the output from our three mainstay fields, namely Tengiz, Karachaganak, and Kashagan.
Considering that from the onset of successful geological exploration activities to the commercial operation of discovered fields takes at least 15 years, the window for seamless replenishment of rapidly depleting resources may have already closed.
The gas reserve structure in the country is less favorable than that of oil, verging on the bleak. The sole extraction asset of QazaqGaz is the Amangeldy group of fields, which makes the company reliant on the associated gas production of KMG and other oil-producing companies. This naturally raises the question: Why was it separated from KazMunayGas? The apparent answer: it should be reintegrated.
Thus, one of the objective reasons for the lag in the development of Kazakhstan's oil and gas industry is the depletion of reserves as deposits are exploited, resulting in a decline in oil quality. The efficiency of geological exploration efforts is low. Most of the discovered deposits are remnants from the often-criticized Soviet era, developed thanks to investments from small investors, distanced from the existing production infrastructure. Over the past several decades, the volume and funding for geological exploration have dwindled. Consequently, the increase in proven reserves does not offset the current energy resource extraction.
The adage that suggests those who possess geological information own the subsoil remains timeless and relevant.
Geological study of the subsoil is not merely a business; it's a science. Without this scientific foundation, it's challenging to achieve positive outcomes, such as new exploratory reserves and subsequent deposits. The mission of the US Geological Survey (USGS) exemplifies this: “Make informed decisions about a changing world? Start with science.”
Regrettably, all is not well in contemporary geological science. Institutes like the K.Satpaev Institute of Geological Sciences and the U.Akhmedsafin Institute of Hydrogeology and Geoecology have been restructured outside of the geological sector, now answering to KazNRTU MES RK. Meanwhile, the Institute of Seismology and SOME fall under the jurisdiction of the Ministry for Emergency Situations. Concurrently, we are witnessing an "aging" of specialists, with younger generations shying away from scientific pursuits due to inconsistent funding and other issues.