Bulat Khusainov, Ph.D. (Econ.), leading researcher, Institute of Economics, Ministry of Education and Science, Republic of Kazakhstan (Almaty, Kazakhstan)

Kulyash Turkeeva, Junior researcher, Institute of Economics, Ministry of Education and Science, Republic of Kazakhstan (Almaty, Kazakhstan)

It was in 1899 that oil first spouted in the southeast of the Caspian Depression in an obscure place called Karashungul. Industrial development started early in the 20th century in two oilfields (Dossor in 1911 and Makat in 1915) at Emba (today the Makat District, Atyrau Region). At that time annual extraction was not more than 250-300 thou tons.

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The republics oil and gas complex belongs to the export block that also comprises metallurgy, uranium and coal mining. The countrys Development Strategy up to the Year 2010 says that the export branches, the oil branch in the first place, are developing faster than the rest of the economy and that they will set the pace for other industries.

Today, the republics explored hydrocarbon reserves are 2.8 billion tons of oil; 0.7 billion tons of gas condensate and 1.7 trillion c m of natural gas. Kazakhstani experts estimate the forecasted resources on land and on the republics stretch of the Caspian shelf at 12 billion tons, 1.6 billion tons, and 5.9 trillion c m, respectively.1 Not all experts, though, agree about the figures, and the assessment range is wide: from 1.5 to over 30 billion tons. Recently, attention became riveted to the marine shelf; French experts, in particular, believe that it contains from 6.8 to 34 billion tons, while the U.S. State Department quotes the figure of 30 billion tons of explored oil reserves of Kazakhstan. According to the International Institute for Strategic Studies in London the Caspian shelf potentially contains 31.8 billion tons of oil and 20 trillion c m of gas. Russian experts are more moderate in their assessments.

Today commercial oil reserves have been found in six regions of Kazakhstan. The largest oilfields in the Atyrau, Aktiubinsk, Western Kazakhstan and Mangistau regions (in the west of the country) contain 94 percent of the total residual recoverable oil reserves, 98 percent of the developed reserves and all recoverable reserves of over 100m tons. Commercial reserves were also found in the Karaganda and Kzyl-Orda regions (the total amount being 144.9m tons); six small and medium-sized gas fields with a considerable amount of nitrogen and helium were discovered in the Zhambyl and South Kazakhstan regions.

Western Kazakhstan with 70 percent of commercial oil reserves in the Atyrau and Mangistau regions is the center of oil extraction in Kazakhstan.

The following land oilfields are the largest in the republic: Tengiz (oil) with the recoverable reserves of from 750m to 1,125m tons; Karachaganak (oil and gas condensate) with over 1.2 billion tons of oil and gas condensate and 1.35 trillion cm of gas; Uzen (oil and gas) with 212.8m tons of residual recoverable oil reserves; Zhanazhol (oil and gas condensate) with 98m tons of residual oil reserves, 40.7m tons of geological reserves of gas condensate, 25.6 billion c m of recoverable gas reserves; Kalamkas (oil and gas) with 103.6m tons of residual oil reserves.

The oil reserves in the Atyrau Region look most promising; according to Kazakhstani geologists, they contain over 879m tons; the Aktiubinsk and West Kazakhstan regions with the perspective reserves of 246m and 195m tons, respectively, offer good prospects.

By late 2002, Kazakhstans share in the structure of the worlds proven oil reserves reached 0.9 percent; its share among the CIS country was 12.2 percent. In 2002, the republic accounted for 1.3 percent of the worlds oil extraction.2 Today the oil sector accounts for 15 percent of the republics GDP.

Among the CIS countries Kazakhstan comes second after Russia where oil extraction is concerned (see Table 1) and is among the worlds 30 (out of 90) oil producers. In 1990, Kazakhstan accounted for 4.5 percent of the CIS total crude oil extractionin 2002, it accounted for 10.2 percent. The growth is explained by two factors: increased hydrocarbon extraction in the republic and decreased extraction in other CIS countries.

Table 1

Oil Extraction (including gas condensate) in CIS in 1985-1999 (mill tons)














































































Other countries











Source: bp Statistical Review of World Energy, June 2003, p. 7.

Oil Industry

The republic is realizing a considerable number of oil and gas projects, the main being Tengiz, Karachaganak, and Kashagan. Tengiz is one of the worlds ten largest oilfields. It is found in the Atyrau Region of Kazakhstan, 160 km to the southeast of the regional center. The oil-bearing structure was discovered and seismically explored back in 1974; exploration drilling was started in 1979, oil was discovered at the same time; development started in 1991. This is the deepest among the worlds largest oilfields. Forecasted recoverable reserves are estimated at 750m to 1,125m tons. This low-density oil is much superior to the traditional Russian Urals brand.3

Today, JV TengizChevrOil (TCO) that works on this and the neighboring Royal Oilfield is the largest oil supplier in the country. It was set up in April 1993 under an agreement between the republics leaders and the American Chevron Corporation. Today the following companies have shares in TCO: the national KazMunayGaz company (20 percent), American ChevronTexaco Overseas Company (50 percent), and ExxonMobil Kazakhstan Ventures Inc. (25 percent) together with the Russian-American JV LUKArko (5 percent).

It should be said that the Tengiz project is a unique one across the post-Soviet expanse: it is expected to attract $20 billion of investments throughout its entire lifespan of 40 years.

In 1993, in an absence of an adequate export quota for the pipeline that crossed Russia the TCO extracted merely 1.3m tons; this figure increased every year. Today, its oil is exported through the Caspian Pipeline Consortium (CPC) system. In 2001, the republic extracted 35.3m tons of oil, 10.4m tons of which were extracted in Tengiz. The figures for 2002 are 47.2m and over 13m tons, respectively. It is expected that in 2006 TCO will produce 20m tons and between 28 and 30m tons in 2010.

The number of workover jobs to be done and capital repairs of equipment naturally affects the annual extraction volumes. As soon as a large-scale project of increasing the extracting and processing capacities is complete together with the gas reinjection project (more of which below) TCO intends to increase oil extraction up to 19m tons a year. In ten years of its work ChevronTexaco invested $4 billion in Kazakhstani economy and intends to invest $2.5 billion more in the next three years. In the same period TCO paid $2.7 billion to the state budget in the form of royalty and corporate taxes $1 billion of which was paid in 2002. It is planning an investment of $3 billion in the next few years in its Tengiz projects.

TCO is also planning larger extraction volumes at the Royal Oilfield (geological reserves, 69.5m tons; recoverable reserves, 27.7m tons), the large-scale extraction on which was launched in November 2001. According to the business plan for 2002-2005, all oil is exported through the KazTransOil pipelines that is part of the KazMunayGaz system and through the CPC system. Starting with 2003 all oil extracted by TCO is exported through the CPC pipelines.

The Uzen oil and gas field is another unique field exploited by the Uzenmunaygaz joint stock company that is part of the KazMunayGaz Co Ltd. Its initial geological reserves are estimated at 1 billion tons; works started back in 1965; in ten years time extraction reached its annual maximum of 16.2m tons; in 1980, the figure dropped to 9m tons. The second crisis started in 1990 when extraction was declining at an annual pace of about 15 percent because of depleted equipment, multilayered geological structure, and companys considerable financial problems. Still, in 35 years of its exploitation the oilfield has already produced 275.8m tons of oil.

The field needed an overhaul: in 1996, the World Bank decided to extend a loan of $108m for this purpose for the period of 17 years under the guarantee of the Finance Ministry of Kazakhstan.4 Together with the money invested by the Kazakh side the projects total cost reached $136.1m. It is planned to bring up extraction to 7m tons by 2005 and extend the projects lifespan to over 20 years.

Caspian Oil

In 2002, it was officially announced that there was oil on the Kashagan oilfield in the northern Caspian. It is expected that the extraction program will take 40 years and will consist of several projects including a newly built export pipeline. The oilfield is found in the northern part of the Caspian, 70 km to the southeast from Atyrau; its recoverable reserves amount to 7 to 9 billion barrels (0.93-1.2 billion tons); the geological reserves are 5 billion tons. The contract between Agip KCO and the national KazMunayGaz Company confirms the oilfields commercial value.

Kashagan is the largest among the oilfields discovered in the last 30 years; an estimation of its commercial reserves is equally important for Kazakhstan and for the worlds oil market. In fact, the figures of recoverable reserves may increase after more prospecting and introduction of new extraction technologies.

Exploration drilling started in 1999 by the international Agip KCO company that includes Agip/ENI through Agip, the projects operator; British Gas, ExxonMobil, Shell, TotalFinaElf with 16.6 percent of shares each; Inpex and ConocoPhillips have 8.33 percent of shares each. British Gas intends to sell its shares which Chinese oil companies are ready to buy. Other shareholders prefer to keep the Chinese out.

It is planned to start commercial extraction in 2005 and to reach a stable extraction level by 2013. The investments in the project before commercial extraction begins will reach $3 billion; the total amount of money invested is expected to be $28 billion. The investors pledged to invest in the construction and development of social infrastructure. On the whole, if realized the program will yield about 80 percent of divisible income (including taxes) estimated at $400 billion.5

It is obviously important to identify the legal status of the Caspian Sea, to delimit the seabed and five economic zones. Until recently each of the five countries defended its own position on the status of the sea and delimitation of the coastal zones. Today, the positions of four out of five are much closer than before: the sides accepted Kazakhstans suggestion that the seabed should be divided along the modified median line. In 1998, Astana and Moscow signed and ratified an agreement on the division of the northern part of the sea under which Kazakhstan acquired a legal right to extract mineral resources from the northern part of the seabed. In so doing, Kazakhstan and Russia demonstrated that adequate conditions, legal guarantees in the first place, could attract more foreign investments. This consideration undoubtedly drew the positions of four states closer together. Kazakhstan and Azerbaijan signed a similar agreement that was ratified in June 2003; Russia and Azerbaijan also concluded an agreement; Kazakhstan and Turkmenistan started talks on the Caspian seabed late in June 2003.

Today, practically all Caspian states do not object to the division of the seabed into sectors yet Kazakhstan, Russia, Azerbaijan, and Turkmenistan want to divide it along the modified median line with due account of commonly accepted norms and principles of international law, while Iran wants to divide the sea into five equal parts under which it will acquire up to 20 percent of the seabed.

One can expect that a corresponding agreement between Kazakhstan and Turkmenistan will be signed before 2003 expires; Ashghabad will sign similar documents with Moscow and Baku. This will remove 80 percent of the Caspian dilemmaIran that will hardly sign a similar document in the foreseeable future will remain alone. It should be added that the resolved problem of the limits and borders of the Caspian states sovereign rights and jurisdiction is important not only for the continued use of the seas natural resourcesit adds to regional security and mutually advantageous cooperation.

The agreement between Russia and Kazakhstan allowed the sides to sign another agreement related to the joint development of three oil and gas structures in the transborder shelf zone. Here I have in mind the Kurmangazy field of Kazakhstan and the Khvalynskoe and Tsentralnoe of Russia. The total oil reserves of the former are estimated at 240m tons. It is expected to yield 100 thou tons of oil a year at the first stage and up to 10m tons in 6 to 7 years. The projects expected lifespan is 30 years; it will pay off in 7 to 10 years. It is planned to invest $100-120m at the stage of prospecting, the projects total cost is expected to reach $1.5 billion.6

In 2003 the republic acquired a State Program of Developing the Caspian Shelf of Kazakhstan that described the way new projects will be developed, possible taxation regimes, responsibilities and rights of firms and companies involved. The shelf fields will be developed in three stages. The first (2003-2005) will create conditions for an annual extraction of 500 thou tons of oil; during the second stage (2006-2010) development will be accelerated while extraction is expected to reach the annual level of 40m tons; at the third (2011-2015) extraction is expected to be stabilized at the annual level of 100m tons. The program will intensify prospecting efforts, outline the conditions under which the newly discovered oil-bearing structures will be developed and organize tenders for prospecting and extraction.

According to President Nazarbaev joint ventures will work in the Kazakhstani sector that will include KazMunayGaz Co Ltd and foreign investors. This principle will apply to the Kurmangazy oilfield: KazMunayGaz and the Russian side own 50 percent of the projects shares each. The same principle will apply to the Khvalynskoe and Tsentralnoe oilfields (before that the oil contracts were based on the Production Sharing Agreements).

Export Oil Pipeline Projects

Export oil pipelines are an absolute priority in all oil extraction projects with foreign investments. It is signally important to bring the local oil to the international markets at competitive transportation costs through highly reliable transportation systems.

The Caspian Pipeline Consortium

The reconstructed CPC project as an independent structure that will move oil from western Kazakhstan to the world market is the most important among several variants of export pipelines expert communities in many countries are discussing. The project includes two legal persons: CPC-R (the objects in Russia) and CPC-K (the objects in Kazakhstan), the need for two legal persons being created by the two countries different tax laws. Both of them will operate under a single administrative body. The shares have been distributed in the following way among the shareholders: Russia, 24 percent; Kazakhstan, 19 percent; Oman, 7 percent; Chevron, 15 percent; LUKArko (Russia), 12.5 percent; Rosneft/Shell, 7.5 percent; ExxonMobil, 7.5 percent; Agip, 2 percent; British Gas, 2 percent; Kazakhstan Pipeline Ventures, 1.75 percent; Oryx, 1.75 percent.

The first line (annual carrying capacity 28m tons of oil) commissioned in 2003 cost $2.1 billion; the main pipeline total cost is estimated at $4 billion; its annual carrying capacity is expected to reach 67m tons.

At first CPC was used to move oil from two oilfields: Tengiz (1.1m tons) and Arman (20 thou tons a month). Today the CPC has five agreements on oil transportation: from the Tengiz, Karachaganak, Arman, Alimbekmola, and Martyshi. By April 2003 the CPC system already moved 16.1m tons of oil to the world markets. There is an agreement with the Karachaganak Petroleum Operating B.V. (KPO) to transport the hydrocarbons from the Karachaganak gas condensate fields. A stretch that will tie together the CPC system and Karachaganak will be commissioned in the nearest future and start operating in the IV quarter of 2003. Its monthly share will reach 500 thou tons of Karachaganak hydrocarbons. When the KPO pipeline is connected with CPC its monthly share will reach 1.7m tons; in future KPO expects to bring up its supplies to 7m tons a year.

The CPC provides a good example of mutually advantageous cooperation among three founding states and eight large oil companies. Its structure answers state and commercial, and national and international interests.


All sorts of variants are possible within this project. Early Caspian oil can be moved by tankers from the Kazakhstani port of Aktau to Baku (the distance is 300 km; possible annual carrying capacity, up to 10m tons). It is the duty of Azerbaijan to move oil across the Southern Caucasus to the terminals of the Turkish port of Ceyhan with the annual hauling capacity of 100-120m tons of oil. The Baku-Tbilisi-Ceyhan (BTC) mainline will be 1,600 km long, with the pipe diameter of 40 inches to let the oil from Kazakhstan and Azerbaijan; annual carrying capacity, up to 50m tons; estimated cost, $3.3 billion.

In 2003, Astana finally decided to participate in the project, during the latest round of talks about a possibility of the republics contribution to the pipeline construction it was decided to discuss an Intergovernmental Agreement between Azerbaijan and Kazakhstan and a Transit Agreement between the investor and the receiving country to outline the commercial conditions of transportation of Kazakh oil. It is expected that the documents will be signed in 2003.

An Aktau-Baku company will be set up to supervise oil transportation to Baku and through BTC; it will comprise the companies already working on the project (ENI, ConocoPhillips, Inpex, TotalFinaElf) and the national KazMunayGaz Co Ltd. The Aktau-Baku and BTC Co may sign commercial agreements.

It is expected that Kazakhstan will move up to 20m tons of oil a year through the BTC pipeline; at the first stage the republic will be able to supply only 7.5m tons a year (the companies operating in the country have 15 percent of shares in the BTC Co). Simultaneously, the economic and technical aspects of the Aktau-Baku-Tbilisi-Ceyhan route will be studied.

The United States is very much interested in the project even though it is rather expensive and ecologically hazardous since part of the pipeline will be laid under water. The interest is explained by the fact that America and some of the West European countries look at the Caspian region as a zone of their strategic interests; they also want to diversify their oil sources, the task to which the BTC will contribute. Steven Mann, Special Advisor to the Secretary of State on Caspian Energy Diplomacy, stated at the Oil and Gas Azerbaijan 2003 conference that the political situation in Iraq would not interfere with the BTC project.

According to the expert community, the situation in Iraq will not affect the foreign companies commercial interest in the region either: they are involved in long-term and expensive projects. Still, as soon as Iraqi oil starts flowing to the world markets the regions countries will be drawn into a bitter rivalry for new foreign investments.

Kazakhstan-Iran-the Gulf

Economically the route via Iran makes more sense. Kazakhstan has been sending its oil across Iran since January 2002. It started with 20 thou barrels a day; today it is exporting 50 thou barrels a day. The oil is moved by tankers from Aktau to the Iranian port of Amirabad; it is expected that by 2004 Kazakhstan will export to the Islamic Republic of Iran up to 500 thou barrels a day, the amount that will require a new pipeline in Iran.

Both countries find the variant highly attractive: first, it does not require a pipeline across Irans entire territory; second, Iran will push down the cost of moving its own oil from southwest to the oil refinery at Tehran. The combined marine-land route is cheaper than a new pipeline. It is expected to move 2m tons of oil along this route every year and to bring up the amount to 6m tons in ten years time.


This 2,080 km long route starts at the Uzen transfer pumping station (TPS), crosses Turkmenistan, goes along the Caspian southern coast, across the Iranian territory and reaches the Island of Kharq in the Persian Gulf. Profitability starts at the 25m tons a year level of which Turkmenistan may supply up to 10m tons a year. The pipe diameter is 40 inches, the project cost, $2 billion.

The transit across Iran is gaining attractiveness together with the attractiveness of the growing Asian markets. The European demand for crude oil is fairly stable and will rely on the traditional sources of oil for a fairly long time to come; the total demand on crude oil in South-East Asia and China is growing consistently by about 5 percent every year. The distance of 6,500 km separates the oil producers of Western Kazakhstan and the oil consumers of Eastern China; a pipeline of this length will cost more than a combined route to the Iranian coast and deliveries by tankers to China and other Asian countries, therefore the route via Iran remains the most attractive one.


The project of a pipeline from Central Asia to the Pakistani ports on the Arabian Sea is directly connected with a pipeline between Turkmenistan and Pakistan. The annual carrying capacity of the future pipeline will be 50m tons while the cost of traffic can be decreased by building two parallel pipelines (for oil and for gas), which is cheaper than an oil pipeline. Political instability in Afghanistan reduces to naught the very possibility of construction works in the nearest future.

There is another variant. During the tender privatization of joint stock Aktobemunaygaz and Uzenmunaygaz companies the China National Oil and Gas Company pledged to build a pipeline between Western Kazakhstan and China. It is expected that the design stage will start and be completed in 2003 because it will rely on the feasibility studies completed back in 2000. There is no doubt that the main pipeline will be builtChina with its huge population and economy that is growing fast badly needs energy fuels. In 2002 alone it imported up to 80m tons of crude oil. It remains to be seen when the project is completed. The first stretch (Atyrau-Kenkiak) is ready; many companies have already betrayed their interest in the second stage (Atasu-Alashankou) 1,010 km long. The projects estimated cost is $850m; it is expected to be funded by loans, and investments from KazTransOil; the Chinese side is prepared to shoulder part of the cost. The project will be realized in two years time.

An analysis of all sorts of oil export projects says that the republic is facing a difficult task of selecting the best and economically the most attractive transportation routes. Safety and ecological hazards should be taken into account as well as political factors. These questions should be answered at the earliest possible time.

Gas Industry

In 2002, the country formulated its Development Conception for Gas Industry7 for the period of up to 2015 under which Kazakhstan (with its 15th place in the world and the 4th in the CIS where the proven gas reserves are concerned65 trillion c m by the end of 2002)8 plans to increase gas extraction by nearly five times. This will be done in two synchronous stages: at the first stage gas prospecting should be completed and extraction begin at the Karachaganak and Tengiz fields; the gas purification plant at the Zhanazhol gas field should be completed; the second stage includes processing and transportation of extracted gas.

In 2002, the republic extracted 12.3 billion c m of natural gas; in 2005, it should extract 20.5 billion c m of gas; the figure for 2010 is 35 billion c m, for 2015, 45-50 billion c m; it will consume 7.84 billion c m, 11.15 billion c m, and 15.83 billion c m, respectively. With these forecasts in view the industry should increase its export potential to 29-34 billion c m by 2015. It is expected that the gas will mainly go to Russia and Western Europe.9

Today, a Kazakh-Russian JV KazRosGaz Co Ltd is the monopoly gas exporter.10 In the first four months of 2003 it bought 1.6 billion c m of crude gas from the Karachaganak Integrated Organization (KIO11) that works on the countrys largest Karachaganak oil and gas condensate field; the bought gas was processed by the gas purification plant in Orenburg. The company obtained 1.4 billion c m of residue gas, 200m c m of which were sent to the customers in the West Kazakhstan Region and 1.2 billion c m were sold abroad for world prices. It should be said that previously this gas was either burnt or sold virtually for nothing.

In 2003, KazRosGaz plans to buy from KIO about 6 billion c m of gas for the Orenburg plant. Out of the resultant 5.3 billion c m of residue gas 4.3 billion c m will be sold abroad. In 2002, Ukraine, Slovakia, Moldova, and Great Britain bought gas from Kazakhstan; it is expected that the number of customers will increase in the nearest future. Today, the republic is limited by the Gazprom main pipeline system when it comes to gas export.

In 2002, the European countries used 41.2 percent of the worlds gas consumptiontheir own gas extraction was much lower than their needs. The gap was filled mainly with Russian and partly with Algerian gas. The very fact that Kazakhstan has broken through to the world markets should be regarded as a great success. Today Russia is exporting its gas to Western Europe, mainly to Germany: in 2002, the FRG consumed 31.50 billion c m out of the total 128.22 billion c m exported by Russia. It should be said that on the whole Germany buys every year 81.68 billion c m of natural gas (Russias share is 38.6 percent of the German imports). Italy comes second with 19.30 billion c m, or 15 percent of Russias exports.

To consolidate its positions on and to extend its share of the European markets KazRosGaz should buy and develop gas fields; this activity needs a license. The company is already moving in this direction; in 2004, it plans to increase the countrys gas transportation capacities, in particular by reconstructing and upgrading the existing gas transportation system and by building a new one along the Caspian shore within the Central Asia-Center project.

In this way the Russian-Kazakh JV has become the cornerstone of a future gas alliance of which much was said several years ago at an informal meeting of the leaders of Kazakhstan, Russia, Belarus, and Kyrgyzstan in Almaty. The alliance that will bring together Russia, Kazakhstan, Ukraine, and Turkmenistan is an economically and geopolitically promising project.

As for the Karachaganak field one can say that it is developing according to a stage-by-stage plan and is gradually increasing gas extraction; KIO is present there under a contract drawn for 40 years (1998-2038.) The investments at the first, preparatory stage (1995-1997) reached $160m; it is planned to invest 3.5 billion at the second stage (1998-2003) that will send up extraction of liquid hydrocarbons to 7m tons a year and to build a gas purification plant and an electric power station with a capacity of 240 MW, and to realize the gas reinjection project. It is planned to repair the liquid trap plant with an annual capacity of 4.6 billion c m and 4.7m tons of condensate; to commission the Karachaganak processing combine, one of the key objects, designed to bring condensate up to the exportable parameters. It will receive more capacities when the second stage is over to increase condensate extraction by 2008 to 12m tons a year. Within the third stage (2009-2038) extraction will become stable and active.12

The TCO JV is another large-scale gas producer of Kazakhstan. In 2002, it launched a gas reinjection project to cut down the flare gas amounts and resolve the hydrogen sulfide problem (today, there are 6m tons of hydrogen sulfide accumulated in Tengiz). This project will be realized in two stages: at the first stage a reinjection object will be built (it is expected to be commissioned in August 2004) to reinject crude gas free from hydrogen sulfide. At the second stage crude sour gas will be reinjected. On the whole the project will cost $400m.

The Kazakh-Chinese CNPC-Aktobemunaygaz plans to supplement the already functioning Zhanazhol gas purification plant with new gas processing capacities at the gas condensate field of the same name in the Aktiubinsk Region. The same company plans to bring up gas extraction from 900m c m in 2002 to 1.2-1.4 billion c m in 2005.

In the next few years the Amangeldy field (the Zhambyl Region) will cover the needs of the countrys south that today consumes 1.5 billion c m a year. If commissioned as expected in fall 2003 it will decrease the areas dependence on Uzbek gas to a great extent. Today, Kazakhstan pays $40 for 1 thou c m of exported gas; Tashkent has never abandoned its attempts to raise the price to $45/1 thou c m. It is expected that during 20 years of lifespan the Amangeldy field will annually produce from 600m to 1 billion c m of gas at the production cost of $22/1 thou c m.

It should be said that the republics capacity is by far exhausted by the functioning gas fields. Kazakhstan is claiming one of the leading parts on the world gas market with the help of the Kashagan offshore gas field.

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The oil and gas sector can develop according to one of the three variants. First, it can go on with the exports of crude oil that are expected to bring high incomes in hard currency needed to build up the industrys new structure. The second is connected with increased oil extraction and an extended transportation system that presupposes more active integration with the neighbors the territories of which are used for transit. Under the third variant it is necessary to increase crude oil refining to meet the countrys requirements in the oil refinery products.

According to local estimates, if the first variant is taken for a unit then the economic efficiency of the second and third variants will be 1.20-1.22 and 5.7 times, respectively. Today, all three variants can be realized yet in future the country should concentrate on the third one.

Let us say in conclusion that the countrys energy potential also includes electric power production, coal mining and nuclear industry.

1 See, for example: Republic of Kazakhstan. Investors Guide. The State Investment Committee of the Republic of Kazakhstan, ed. by B.D. Khusainov, Almaty, 1998, p. 56; U. Karabalin, 100 let kazakhstanskoy nefti, Caspian Magazine, Anglo Caspian Services Ltd., London, 1999.
2 See: bp Statistical Review of World Energy, June 2003, pp. 4, 7.
3 See: Petroleum Encyclopaedia of Kazakhstan, Anglo Caspian Services Ltd., Astana, London, 1999, p. 584.
4 In 1999, this loan was re-registered under the guarantee of the Kazakhoil National Company (now NC KazMunayGaz).
5 See: B. Khusainov, Resource Potential of the Kazakhstan Economy, Caspian-2000, Anglo Caspian Services Ltd., London, 2000.
6 See: Kazakhstan Oil, Caspian Magazine, Anglo Caspian Services Ltd., London, 2002, p. 39.
7 Today, work is going on on the conception-based Development Program for Gas Industry.
8 See: bp Statistical Review of World Energy, June 2003, p. 20.
9 See, for example: Gas of Kazakhstan, Caspian Magazine, Anglo Caspian Publishing Ltd., London, 2002, pp. 86-92.
10 The structure was set up a year ago by KazMunayGaz and Gazprom of Russia, each having 50 percent of the authorized capital.
11 It includes the BP Group of Britain (32.5 percent), ENI of Italy (32.5 percent), ChevronTexaco of the U.S. (20 percent), and LUKoil, a Russian oil company (15 percent).
12 See: Gas of Kazakhstan, p. 90.

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