Kazakhstan Oil and Gas Report Q3 2012

The Kazakhstan Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kazakhstan's oil and gas industry.

BMI View: Despite widespread strikes and protests in the oil-rich province of Mangystau in 2011, our outlook for Kazakhstan remains broadly optimistic now trouble has subsided and disgruntled oil workers have returned to work – with the impact of the movement seemingly rather limited. Meanwhile, KazMunaiGas’ acquisition of a 10% stake in Karachaganak will greatly improve the upstream environment, particularly for the IOCs involved in the project.

The main trends and developments we highlight for Kazakhstan’s oil and gas sector are:
- Protests and strikes in late 2011 in the oil-rich province of Mangystau, which accounts for about 30% of Kazakhstan's estimated 1.6mn barrels a day (b/d) of production output, have now completely died down and the majority of the oil workers that had been fired by KazMunaiGas (KMG) have been reinstated.

The movement had a limited impact on the country’s oil and gas sector: there were no reports of foreign operators being affected and even KMG suffered just a 7% fall in annual output. The strikes failed to spread to Kazakhstan’s pre-Caspian basin where more about 60% of the country’s resources are located.

The reappointment of Prime Minister Karim Massimov and of Oil and Gas Minister Sauat Mynbayev following the January’s parliamentary elections further indicates policy continuity in the hydrocarbons sector.

- KMG’s acquisition of a 10% stake in the Karachaganak gas and condensate project for a total pre-tax consideration of US$3bn, including US$1bn in net cash and the settlement of outstanding legal claims against the operating consortium, is a positive move for the foreign companies involved. The deal removes many of the legal uncertainties surrounding their operations in the country and opens the door to the longdelayed third phase of development, which will boost output from the field.

- We forecast that the estimated 2011 gas output of 12.26bn cubic metres (bcm) will rise to 15.79bcm by the end of 2016. Infrastructure bottlenecks and delays to key decisions with regard to associated gas have forced us to moderate our assumptions. However, the country is still set to become a major gas exporter. Our demand forecasts see consumption reaching no more than 12.73bcm in 2016, providing export potential of 3.66bcm.

- State oil and gas group KMG believes the Kashagan field expansion could be completed by 2018-2019 – despite government concerns over spiralling costs. Former CEO Bolat Akchulakov has argued this would be subject to Shell and other partners agreeing on a development concept by the beginning of 2012.

- Output at Kashagan – with expansion having been repeatedly delayed – will reach about 370,000b/d during first-phase expansion and rise to 450,000b/d by 2015 or 2016, Oil and Gas Minister Sauat Mynbayev said on October 4 2011.

- According to Mynbayev, oil output hit 80.10mn tonnes per annum (tpa), equivalent to 1.61mn b/d, in 2011. This corresponds to BMI’s own estimates which put 2011 liquids output, including gas liquids, at 1.63mn b/d. The government expects production to hit 90.00mn tpa, or 1.81mn b/d, by 2015before being able to sustain production levels of 120-130mn tpa, 2.41-2.61mn b/d, from 2020 onwards. This is once again similar to BMI forecasts, which see output reaching 1.85mn b/d in 2015, 2.46mn b/d in 2020 and 2.45mn b/d in 2021.

- We are forecasting domestic oil demand will reach 320,901b/d by 2016. This implies that oil exports should rise from an estimated 1.38mn b/d in 2011 to 1.79mn b/d by 2016. BMI expects the country to fall short of the 2020 export target of 3.00mn b/d set by the government, with our forecasts estimating no more than 2.07mn b/d to be exported that year.

Kazakhstan’s dependence on energy prices leads to high volatility in the country’s export revenues. Our assumptions of tight supply due to booming demand in emerging markets is clearly an opportunity for the country. As a result, we assume OPEC basket oil prices to increase from US$107.52 per barrel (bbl) in 2011 to US$111.47/bbl in 2012, thus creating an upside risk for the Kazakh macroeconomic outlook. SHOW LESS READ MORE >

BMI Industry View 5

SWOT Analysis 7

Kazakhstan Oil and Gas SWOT 7

Global Energy Market Outlook 8
Table: Oil Production Forecasts, 2010-2016 (‘000 b/d) 8
Table: Oil Consumption Forecast, 2010-2016 (‘000 b/d) 14

Regional Energy Market Outlook 15

Kazakhstan Energy Market Overview 19
Table: Kazakhstan – Upstream Projects 20

Industry Forecast Scenario 21

Oil And Gas Reserves 21
Table: Kazakhstan Oil & Gas – Historical Data And Forecasts, 2009-2016 21
Table: Kazakhstan Oil & Gas – Long-Term Forecasts, 2014-2021 22

Oil Supply And Demand 23

Gas Supply And Demand 25

Export Revenues 26

Key Risks To our Forecast Scenario 26

Oil And Gas Infrastructure 28

Refineries 28
Table: Major Refineries In Kazakhstan 29

Oil Terminals/Ports 31

Oil Pipelines 31

Gas Storage Facilities 33

Gas Pipelines 33

Regional and Country Risk/Reward Ratings 34
Table: Upstream Risk/Reward Ratings 36

Eastern Europe Holds The Top Spot 37
Table: Downstream Risk/Reward Ratings 38

Kazakhstan Upstream Rating – Overview 40

Kazakhstan Upstream Rating – Rewards 40

Kazakhstan Upstream Rating – Risks 40

Kazakhstan Downstream Rating – Overview 40

Competitive Landscape 41

Executive Summary 41
Table: Key Players – Kazakhstan Oil And Gas Sector 42

Overview/State Role 43

Licensing And Regulation 43

Government Policy 46

International Energy Relations 48
Table: Key Upstream Players 48
Table: Key Downstream Players 49

Company Monitor 50

KazMunaiGaz (KMG) 50

Chevron 54

Eni Kazakhstan 57

BG Kazakhstan 59

ExxonMobil Kazakhstan 61

Shell Kazakhstan 63

Lukoil Kazakhstan 65

PetroKazakhstan 67

CNPC 70

Korea National Oil Corporation (KNOC) – Summary 73

ConocoPhillips – Summary 73

BP – Summary 74

Total – Summary 74

Rosneft – Summary 75

Tethys Petroleum – Summary 75

Roxi Petroleum – Summary 76

MangistauMunaiGaz – Summary 77

Zhaikmunai – Summary 78

Oil And Natural Gas Corporation (ONGC) – Summary 78

Max Petroleum – Summary 79

Petrom – Summary 79

Others – Summary 80
Table: Oil Consumption, 2009-2016 (000b/d) 81
Table: Oil Consumption Long Term Forecasts (000b/d) 81
Table: Oil Production, 2009-2016 (000b/d) 82
Table: Oil Production Long-Term Forecasts (000b/d) 83
Table: Refining Capacity, 2009-2016 (000b/d) 83
Table: Refining Capacity Long Term Forecasts (000b/d) 84
Table: Gas Consumption, 2009-2016 (bcm) 84
Table: Gas Consumption Long-Term Forecasts (bcm) 85
Table: Gas Production, 2009-2016 (bcm) 85
Table: Gas Production Long-Term Forecasts, (b/d) 86
Table: LNG Gas Exports (bcm) 87
Table: LNG Gas Exports (bcm) 87

Methodology And Risks To Forecasts 88

Glossary Of Terms 89

Oil And Gas Risk/Reward Ratings Methodology 90

Ratings Overview 90
Table: BMI’s Oil & Gas Business Environment Ratings – Structure 91

Indicators 92
Table: BMI’s Oil & Gas Upstream Ratings – Methodology 92
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology 93

BMI Methodology 95

Energy Industry 96

Cross checks 97

Sources 97