THE OIL AND GAS SECTOR IN KAZAKHSTAN

Abstract

Since the turn of the century, the economy of Kazakhstan has demonstrated steadily high rates of growth. Throughout this period the country’s gross domestic product (GDP) has kept growing at an annual rate of over 9%. The republic’s economic achievements are particularly impressive when compared to the performance of most other CIS countries, which, along with Kazakhstan, are rebuilding their national economies after the breakup of the U.S.S.R. Even Russia, the largest CIS state, has not experienced such high rates of GDP growth, although it benefits from the current rise in world energy prices to an even greater extent than Kazakhstan.

Naturally, the latter circumstance generates interest in a study of the role played in the republic’s economy by the oil and gas sector, the main driving force behind its current economic “boom.” 

 In the first few years of Kazakhstan’s independence, it’s top political leaders and (at their suggestion and possibly at their request) the mass media kept talking about the fabulous hydrocarbon reserves of Kazakhstan and of the Caspian region as a whole. Kazakhstan was most frequently compared to Kuwait (“a second Kuwait”), and the Caspian region, to the Persian Gulf (“a second Persian Gulf”). Today, ten years later, when passions have subsided and geological explorations have made it possible to give a more accurate estimate of hydrocarbon reserves in the region, analysts have come up with more reliable and scientifically valid assessments of the hydrocarbon potential of the Republic of Kazakhstan and the entire region.

As might be expected, hydrocarbon reserves in this area have turned out to be much more modest than was believed in the early and mid-1990s. Nevertheless, these reserves are quite significant even on a global scale, and they will play (and are already playing) an important role in the economy of the Caspian states, including Kazakhstan.

According to the CIA World Factbook 2005, proved oil reserves in Kazakhstan at the beginning of 2005 totaled 26 billion barrels (bbl), and in terms of this indicator the republic ranked 12th in the world. The same source put the reserves of natural gas in Kazakhstan in 2005 at 1,800 billion cubic meters (bcm), and here the country was only 16th in the world. According to the same data, the oil reserves of Kuwait, which is sixth in the global oil reserve rankings, totaled 96.5 billion bbl and were 3.7 times larger than those of Kazakhstan. In terms of proved reserves of natural gas, Kazakhstan today is somewhat ahead of Kuwait.1 Obviously, such a significant difference in the oil reserves of the two countries (in favor of territorially small Kuwait compared to Kazakhstan, whose area is over a hundred times larger) rules out the possibility of defining the latter as “a second Kuwait.”

Data from different sources on hydrocarbon reserves in Kazakhstan and in the Caspian region continue to differ widely, but one thing is clear: the republic has significant reserves of hydrocarbons both in the Kazakhstan sector of the Caspian shelf and deep inside the country. Oil and gas bearing regions occupy more than half of its territory (1.7 million sq km out of 2.7 million sq km). As of mid- 2005, the republic had 179 registered hydrocarbon deposits, including 87 oil, 17 gas, 30 oil and gas, 25 oil and gas condensate, and 20 oil condensate fields.2