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Oil and Gas Industry in 2016
The Ministry of Energy of the Republic of Kazakhstan has summed up the work results in the sphere of oil and gas production, refining and transportation.
Oil industry
Oil refining
In 2016 the volume of oil production in Kazakhstan amounted to 78 mln tons, exceeding the planned indicators by 2.5 mln tons. The downtrend of oil production is continued: 79.46 mln tons of oil produced in 2015, which, in turn, accounted to 98.3% of the previous year indicators. Like in previous years, the companies, operating in the oilfields of Atyrau, Mangystau and West Kazakhstan regions kept the leading positions in oil production.
The decline in production volumes is explained by difficult economic situation of oil producers due to the fall in the global oil prices. It could be more serious, but in 2016 the Government has taken a range of measures to reduce the tax and administrative burden for subsoil users, including:
- use of floating rate for export customs duty with reference to global oil price;
- 11 companies received the preferences under the Mineral Extraction Tax (MET) calculation for the period of 2014-2016;
- if it was necessary, the problematic issues of each individual enterprise were addressed in "manual mode".
According to the Ministry estimates, these measures have helped to exceed the production plan by 2.5 mln tons of oil. About 1 mln tons were additionally produced by Kashagan, which operation resumed after 3 years of repair and renewal works.
Also, the following investment decisions, allowing increase the production of oil production in the near future, were adopted in 2016:
- acceleration of decision making on financing the Future Growth Project of Tengiz field. Tengizchevroil JV plans to increase its production from 27 mln to 39 mln tons of oil per year from 2023;
- pre-engineering of the second phase of Kashagan development first stage was started (compression centre). In the coming years it will allow to attract the investments and to increase the production volumes from 370 thous. to 450 thous. barrels per day.
"Due to completed work, as well as to increased global oil price up to 50-55 USD per barrel, we can summarize that the downtrend of oil production is stopped”, assures Kanat Bozumbayev, the Minister of Energy.
Due to the commitments, taken by Kazakhstan within the frameworks of OPEC countries-members initiative to limit oil production, it is planned to produce in 2017 up to 81 mln tons of oil, including volumes at Kashagan - up to 8 mln tons, at TCO - up to 27.5 mln tons, and at Karachaganak - up to 11.85 mln tons.
Oil export volume increased to 62,2 mln tons in 2016; Caspian pipeline Consortium (CPC) pumped 40 mln tons, the record oil volume, through Tengiz-Novorossiysk oil pipeline. The completion of the СPC Future Growth Project by the end of 2017 will increase the flow capacity of oil pipeline in Kazakhstani division up to 53 mln tons per year.
Second extension work of the second phase of Kazakhstan-China oil pipeline construction with flow capacity of 20 mln tons per year is continued. The reconstruction of Kenkiyak head oil pumping station is planned to be completed this year.
Oil export forecast for 2017 is 65 mln tons.
Subsoil use
3 year lasting decline in oil and gas industry has reduced investments for exploration and production sector in Kazakhstan from 18 bln USD in 2013 to 12 bln USD in 2016. In the coming years increasing investments for exploration and production sector are projected, owing to the TCO future expansion project , which will stipulate a multiplicative triple effect:
- oil production increase;
- creation of min. 20 thous. jobs;
- investment to the country will be spent on Kazakhstani goods, works and services at the rate of minimum 32% of the total project cost (12 bln USD).
The Ministry of Energy, within the framework of domestic oilfield services, is actively working to promote the establishment of joint high-tech enterprises. 19 major joint ventures were established in the recent years, including JV KazMunayGas and Nabors in drilling, Fluor, Worley Parsons and design oil and gas institutions (KIOG, KGNT) in engineering, Ersai and Daewoo in the production of metal constructions, Kaz MI in slush production, etc.
The contests on gaining the right for subsoil using in 8 sections were held in 2016. The total amount of signing bonus exceeded 2 bln KZT. This year it is planned to tender more than 30 subsoil areas, thus ensuring inflow of investment for the subsoil sphere.
Geological Exploration
Due to the difficult economic situation in the industry, the reduction of annual oil reserves growth to the average production volume by 22% is observed. The Ministry sees the problem solution in increasing incremental growth and reserves completion through attracting investments for exploration.
The systemic measures for investments encouragement are developed in the Natural Resources Code and in the Tax Code.
In particular, the draft Natural Resources Code provides:
- simplification of gaining the right for subsoil use, including through the auction on application, 2 types of contracts - "exploration and production" and "production", reducing the legal and economic expertise;
- implementation of international reporting system of reserves;
- removing administrative barriers: the list of basic project documents will be shorten, some permissions will be excluded, the terms and procedures for the document review will be reduced.