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Kazakhstan Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 98
'The latest Kazakhstan Oil & Gas Report from BMI comes at a time when the country is poised to start a new phase of rapid oil production growth to match the exciting period from 1995-2005. Kazakh oil production, having grown to 1.60mn b/d by 2010, should increase to 2.28mn b/d by 2015 in a burst of activity that should make Kazakhstan one of the world's top 10 oil exporters. With relatively small and stable domestic consumption, which should rise from 250,000b/d in 2010 to only 309,000b/d by 2015, the country is likely to remain a steady and significant oil exporter over the medium term.
Kazakhstan is not known for its gas industry, as despite being one of the region's largest producers its output is dwarfed by that of near neighbours Russia, Turkmenistan and Uzbekistan. Although this will continue to be the case, gas will play an increasingly important role in the country's energy industry, with output set to rise from 14.3bn cubic metres (bcm) in 2010 to as much as 29.5bcm by 2015. With gas consumption set to rise at a slower rate from 9.6bcm to 12.9bcm by 2015, gas exports should rise by over 250% to 16.6bcm by 2015.
Over the second half of the decade, oil production growth will slow, rising by only 8% to 2.46mn b/d over the five years to 2020. Consumption growth will speed up however, with Kazakhstan using 394,000b/d by 2020, up from 309,000b/d in 2015. This should mean that oil export growth should slow by 2020, with exports only rising from 1.97mn b/d in 2015 to 2.06mn b/d by 2020.
Both gas production and gas consumption will continue to grow for the foreseeable future, although faster consumption growth should put export volumes under pressure by 2020. Kazakh gas production should reach 40.6bcm by 2020, more than double the 2011 level. Consumption, however, should more than triple on 2011 levels, rising from 7.2bcm to 24.1bcm by 2020.
Although Russia will continue to dominate oil supply in the region, backed by huge and under-exploited reserves, the Caspian states have an important role to play, with Azerbaijan and Kazakhstan an increasingly significant factor. The growth rate in Russian oil supply has slowed appreciably since the early-2000s but the acceleration of Caspian expansion means that the region will make a growing contribution to world oil production.
Global GDP growth in 2011 is forecast at 3.2%, down from 4.3% in 2010. Growth in the eurozone should be marginally higher than 2010, while US and Chinese economic expansion will slow and Japan's growth will be negative, reflecting the devastating earthquake and tsunami in March 2011. Our oil price assumption for 2011 is US$101.90/bbl for the OPEC basket, falling to US$97.50/bbl in 2012.
Kazakhstan holds third place, above Turkmenistan, Russia, and Azerbaijan, in BMI's composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It still occupies first place in BMI's updated upstream Business Environment rating, now four points ahead of neighbour Azerbaijan. Its oil and gas production growth outlook, asset immaturity, high reserves to production ratios (RPR) and competitive landscape work in the country's favour, but are undermined by a relatively unappealing risk environment.
Kazakhstan is close to the bottom of the league table in BMI's updated downstream Business Environment rating, holding 13th place above Uzbekistan and Azerbaijan. There are few particularly high scores, but ambitious refining capacity expansion plans make progress further up the rankings possible.
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