Kazakhstan’s Geopolitical Circumstances

2.1.2 Current Circumstances of Energy Exploitation in Kazakhstan

Kazakhstan is the only country bordering Russia among the five Central Asian countries, and can act as an intermediary. According to the BP Statistical Review of World Energy 2013, the proven oil reserves in Kazakhstan are around 30 billion barrels. Kazakhstan’s main oil and natural gas fields are Tengiz, Karachaganak, and Kashagan.

2.1.2.1 Kazakhstan’s Geopolitical Circumstances

Kazakhstan borders China to the east, the Caspian Sea to the west, Uzbekistan, Turkmenistan and Kyrgyzstan to the south, and Russia to the north. It is the only country bordering Russia among the five Central Asian countries, and can act as an intermediary between other Central Asian countries and Russia. Kazakhstan is the ninth biggest oil-and-natural gas-rich country, with 2.7% of total reserves in the entire world, and the third biggest oil-and-natural gas-rich country in the Caspian Sea region. Its oil and natural gas reserves cover an area of about 1.7 million square kilometers and are distributed in the Mangyshlak Peninsula in the west and the Caspian Depression, while its main oil and natural gas fields are the Tengiz, Karachaganak, and Kashagan fields. Gross domestic product (GDP) was U.S. 235.6 billion in 2012, while its GDP growth rate was 5%.

According to the BP Statistical Review of World Energy 2013²⁷, the proven oil reserves in Kazakhstan are around 30 billion barrels. These proven reserves are predominantly located in Atyrau province (40%), Mangystau province (35.3%), West Kazakhstan province (9%), and Kyzylorda province.

2.1.2.2 Kazakhstan’s Oil Fields ²⁸

27 “BP Statistical Review of World Energy June 2013,” BP Global, available at:

http://www.bp.com/content/dam/bp/pdf/statistical-review/statistical_review_of_world_energy_2013.pdf, (accessed:20131201).

28 “Kazakhstan,” U.S. Energy Information Administration (EIA), available at:

http://www.eia.gov/countries/cab.cfm?fips=KZ, (accessed: 20121201).

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2.1.2.2.1 Tengiz

Tengiz is Kazakhstan's largest oil field which accounts for almost a third of total production in Kazakhstan. Starting from 1993, this field, situated onshore in northwestern Kazakhstan, has been operated by the Tengizchevroil joint venture, which is comprised of Chevron (50 percent, ExxonMobil (25 percent), KazMunayGas (KMG) (20 percent), and LukArco (5 percent). Its oil is exported through the Caspian Pipeline Consortium (CPC) oil pipeline from Tengiz to Novorossiysk, Russia, with estimated recoverable reserves of about 0.8 to 1.2 billion tons.

Wood Mackenzie consultancy estimates that oil output at Tengiz will reach 844,000 bbl/day by 2020 from 520,000 bbl/day through June 2012.

2.1.2.2.2 Karachaganak

Located onshore in northwestern Kazakhstan, Karachaganak produces almost 15% of the total oil production of Kazakhstan. The field is operated by the Karachaganak Petroleum

Operating (KPO) consortium under a production sharing agreement (PSA). The KPO consortium is constituted by BG and Eni, (each with 32.5 percent ownership), Chevron (having 20 percent), and Lukoil (with 15 percent).With the completion of the Atyrau pipeline segment in April 2004, built by the Caspian Pipeline Consortium (CPC), the CPC pipeline has become the main export portal for Kazakhstan’s Karachaganak oil field.

Dependency on Russia’s transportation infrastructure was therefore reduced. Wood

Mackenzie consultancy states that its output would rise from 244,000 bbl/day as of June 2012 to 340,000 bbl/day by 2020. It has oil reserves of about 9 billion barrels of oil and gas

condensate, as well as 1.33 trillion cubic meters of natural gas.

2.1.2.2.3 Kashagan

The Kashagan oil field, discovered in 2000, is the largest oil field outside the Middle East, ranking fifth in the world in terms of its reserves. Kashagan and the nearby Tenghiz oil field together comprise the largest oil field to be found in the last thirty years. The field is being developed by Agip KCO Company, a consortium consisting of ConocoPhilips, Eni,

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ExxonMobil, Inpex Holding Inc., Kazakhstan’s state-owned KazMunayGas, Royal Dutch Shell, and Total SA, and operated by Eni. In 2007, Eni projected that the oil field may reach a production capacity of 300,000 barrels per day by 2011. In an agreement announced by Eni on January 14th, 2008, KazMunayGas’ share ownership went up from 8.33% to 16.81% after long negotiations. Other shareholders such as ExxonMobil, Eni, Total SA and Royal Dutch

Shell also lowered their respective ownerships from 18.5% to 16.81%. The remaining two shareholders, ConocoPhillips and Inpex Holding Inc. were to decrease their share as well.

Investments in this oil field are estimated to be 136 billion US dollars. ²⁹

On 7th Sep 2013, Chinese President Xi Jinping signed a deal with the Kazakhstan government involving the Kashagan Oil Field. According to that agreement, China will pay

$5 billion in exchange for 8.33 percent of the offshore oilfield in the Caspian Sea.³⁰

2.1.2.2.4 Uzen

Situated in the Magnistau area of southwestern Kazakhstan, this field has been run by KMG since 1961, having an output of around 100,000 bbl/day in the early 2012.

2.1.2.2.5 Mangistau

Situated in the Magnistau area of southwestern Kazakhstan, it is being utilized by both KazMunayGas (KMG) and the China National Petroleum Corporation (CNPC) since 1995. It was producing 117,000 bbl/day in early 2012.

29 吳賢煜，「中國與俄羅斯在哈薩克斯坦之能源競逐」，清雲科技大學碩士論文 (桃園：2010 年 6 月)，

頁 38-67。[Wu, Hsienyu. Zhongguo Yu Eluosi Zai Hasakesitan Zhi Nengyuan Jingzhu (China and Russia compete for energy in Kazakhstan), unpublished thesis, Ching Yun University (Taoyuan: June 2010), pp. 38-67.]

30 Gordeyeva, Mariya. “China buys into giant Kazakh oilfield for $5 billion,” Reuters News Service, Sep 7, 2013, available at: http://www.reuters.com/article/2013/09/07/us-oil-kashagan-china-idUSBRE98606620130907,

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2.1.2.3 A Brief Review of Kazakhstan’s Post-Soviet History and its Relations among