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Tengiz Effect – 2033 and beyond

ENERGYInsights&Analytics

Introduction

The Tengizchevroil (TCO) project stands as a cornerstone of Kazakhstan's oil industry, representing a significant portion of the country's crude oil production and reserves. As a pioneer of stabilized contracts in Kazakhstan, TCO's concession is nearing its end in 2033, necessitating a strategic approach to establish a new balance of interests that benefits both the Republic of Kazakhstan and the shareholders. The project's technical complexity and capital intensity underscore its importance to the national economy, making it crucial to negotiate terms that are advantageous for Kazakhstan while remaining acceptable to investors.

The TCO project is not just an oil field; it is a symbol of Kazakhstan's economic aspirations and its integration into the global energy market. This project has essentially become the cornerstone of economic legitimacy for a newly independent Kazakhstan. The involvement of major international investors demonstrated global business confidence in our country’s long-term potential. The project's success has been built on a foundation of international cooperation, technological innovation, and strategic foresight. As the end of the current concession approaches, Kazakhstan faces the challenge of renegotiating terms that will continue to attract foreign investment while maximizing the benefits for its economy. This delicate balance requires a nuanced understanding of both the global oil market and the specific needs of the Kazakhstani economy.

About TCO and its footprint in Kazakhstan

Tengizchevroil is a joint venture established in 1993 to manage the development and operation of the Tengiz oil field, one of the world's largest and deepest oil fields, located in the southern Pre-Caspian basin of Kazakhstan. The venture is a collaboration between Chevron (holding a 50% stake), ExxonMobil (25%), KazMunayGaz (20%), and Lukoil (5%).

TCO operates the Tengiz and Korolevskoye fields, which together hold estimated recoverable crude oil reserves of 936 million tons (approximately 7.48 billion barrels using a conversion factor of 7.98 barrels per ton) as of the end of 2022, representing 21% of the total recoverable oil reserves in Kazakhstan. Additionally, the fields contain 469 billion cubic meters of gas (approximately 16.57 trillion cubic feet using a conversion factor of 35.35 cubic feet per cubic meter), accounting for 12% of the total recoverable gas reserves in Kazakhstan.

TCO plays a vital role for Kazakhstan’s economy. The company is by far the largest player in the oil industry as it produces around one-third of the country’s total crude oil output. Since

its inception as a joint venture, the company has produced 561 million tons of oil between 1993 and 2023, which accounts for 29% of the country’s total oil production over the same period. Since TCO invests heavily in expanding its production capacity, its importance for Kazakhstan’s economy is poised to remain very high for the next decade. As a result of these efforts, TCO is poised to solidify its dominance in Kazakhstan’s oil industry, with its share of the country’s total oil output projected to expand to 43% by 2033 when current concession for Tengiz expires. To that date recoverable oil reserves of Tengiz and Korolevskoye fields still vast 534 million tons. TCO also boasts a significant footprint in Kazakhstan’s natural gas production. TCO’s impact on Kazakhstan is difficult to overestimate. The project fueled the creation of crucial infrastructure facilities such as the CPC pipeline, and it will continue to be the foundation for the development of Kazakhstan's economy in the future, including initiatives like chemical gas projects.

According to TCO’s FY2023 financial statements, crude oil is the major revenue stream that contributed around 97% to total sales. The company’s FY 2023 revenue contributed around 7% to the country's GDP. TCO’s oil is exported via the Caspian Pipeline Consortium (CPC), which has undergone several debottlenecking projects to increase its capacity to accommodate future production increases.