The country’s natural gas export growth is projected to slow
As part of a working mission to Kyzylorda region, Prime Minister Bakytzhan Sagintayev visited the Karaozek compressor station, where he reviewed the Saryarka gas pipeline trail master plan in the context of implementing the Fifth Social Initiative of the President of the Republic of Kazakhstan – «Further Development of the Country’s Gas Infrastructure».
The Karaozek station is designed to function within the Beyneu-Bozoy-Shymkent gas trunk line system in order to ensure a regular supply of natural gas from western groups of Kazakhstan’s fields (Karachaganak, Kashagan, Tengiz, Zhanazhol and Urikhtau). The project is currently in its start-up phase. It is designed for an annual capacity of 10 billion cubic meters, with the subsequent expansion to 15 billion cubic meters.
The construction of the Saryarka trunk gas pipeline, along the Kyzylorda-Zhezkazgan-Karaganda-Temirtau-Astana route, will commence in July this year. It has to start at the Karaozek compressor station, which should provide 2.7 million people with natural gas.
The terms for completion of the construction of the gas pipeline to Astana were announced at a government session in Kazakhstan on March 13.
Kazakh Energy Minister Kanat Bozumbayev spoke about the plan to build a natural gas pipeline to Astana, Kazinform reported.
Addressing the session, he noted that a special working group at the ministry is working on the implementation of the roadmap for the construction of the pipeline.
As is well known, as early as in the beginning of 2012, President Nursultan Nazarbayev affirmed the need for gasification of the central region and the capital of Kazakhstan. Back then he, giving an annual state of the nation address, instructed the Government as follows: «It is necessary to complete the project design and begin construction of a gas processing plant with the capacity of 5 billion cubic meters a year on the Karachaganak field. I instruct the Government to plan and launch a pipeline system that will provide gas supply in the central region of the country, including its capital. It is capital intensive and important work. We have to do it to get rid of dependence on natural gas. Kazakhstan is a country producing oil and gas. We are obliged to gasify our country, no matter how much it costs us».
So, the government should have considered this project primarily as a social one and finance it through inter alia public investment, because the new gas pipe to the north would undoubtedly give impetus to the development of private business up there and improve the ecological situation in Astana. However, more than five years later there had been minimal progress.
Speaking at a press conference on 21 August 2017, Energy Minister Kanat Bozumbayev said, «KazTransGas, a national gas transmission system operator, has carried out a feasibility study on the project. It has undergone the state expertise… Estimated capacity of the pipeline would be 3 billion cubic meters (bcm) of natural gas per year, with the total project cost coming in at upwards of 260 billion tenge». It was also learnt that there was a question of seeking funds for it.
«We comprehensively examined and debated this issue and submitted it to the Government for consideration. It is not possible for KazMunaiGaz to obtain credit as they are extremely over-indebted. The issue is therefore going to be dealt with through KazTransGaz. For the time being, the project’s financing through KazMunaiGaz remain challenging, and we have been looking for an outside investor to overcome this problem», Mr. Bozumbayev said.
It seems quite logical that the construction of a new gas transportation system should be carried out by KazMunayGas National Co. After all, as set out in paragraph 14 of Article 5 of its charter, the subject of KMG’s activity, among other things, shall be «participation in designing, financing, construction, ownership and operation of oil and gas pipeline system within the territory of the Republic of Kazakhstan and neighboring states (inclusive of the facilities for storage, loading and transshipment to other modes of transport), used for hydrocarbons transportation».
Yet there was one small snag: the national company, sadly, did not have billions to spare, and the net debt of KazMunaiGaz on July 1, 2017 was 1130 billion tenge ($3.5 billion) and it was simply unable to contract new loans.
There was still no indication as to when the project would be launched. The answer to that question was received only this year.
Speaking at the joint session of Parliament on 5 March 2018, Kazakhstan’s President Nursultan Nazarbayev announced a package of unprecedented in its scope and content of social reforms, represented as «Five Social Initiatives». In general, the plans of our nation’s leader are to give a great impetus to social advancement in Kazakhstan. The fifth of those «Five Social Initiatives» is the further gasification of the country. Nursultan Nazarbayev proposed to stretch a new gas pipeline from Kyzylorda to Astana via Zhezkazgan, Karaganda and Temirtau.
The implementation of this project would involve not only social sphere improvement, but the improvement of people’s quality of life. Gasification should reduce emissions; improve the ecology in the central and northern regions of the republic. Only in the capital city of Kazakhstan the amount of emissions would be reduced by 10 times as a result. But the most important thing is that Nursultan Nazarbayev established a specific timetable for implementation. He stressed that the project should be fully functional within the next 18 months.
«Only nine (of Kazakhstan’s) regions are currently gasified – mainly in the western and southern parts of the country, while its central and northern parts are still being left without gas. This makes it necessary to construct a gas transmission line», Nazarbayev said in his address to the Kazakh MPs.
Although a majority of the natural gas produced in Kazakhstan is reinjected into oil fields to aid oil production, the country’s marketed natural gas production has annually increased from 8 to 52 billion cubic meters since the fall of the Soviet Union in 1991. According to Mr. Nazarbayev, projections for the coming years indicate that those upward trends would continue.
As Kazakhstan’s natural gas production is significantly higher than its natural gas consumption, the country has taken advantage of its ability to be a net exporter of natural gas.
The other side of the coin is that just almost 50 percent of the country’s population has natural gas, compared to 68 percent in Russia, 72 percent in Ukraine, 75 percent in Uzbekistan, 80 percent in Azerbaijan, 93 percent in Armenia. The point then arises: How is it that Kazakhstan, a great power in terms of gas production, does not provide at least most of its citizens with gas?
Yet we are pleased to note that it is expected to change. Speaking recently at a press conference in the Government, Kazakhstan’s Deputy Energy Minister Magzum Mirzagaliyev said: «Undoubtedly, gasification of the country will reduce the volume of exports. No one is going to deny it. But there is the key: gas is the national welfare of our republic and it should work for the benefit of our people».
So, the construction of the Saryarka gas pipeline should be finished within 18 months. Nursultan Nazarbayev stressed that the Kazakh government must attract investment funds, including from international financial institutions, to complete the project. It is expected to be launched in July.
For reference: At the first stage, it is planned to construct the main gas pipeline along the route Kyzylorda – Zhezkazgan – Karaganda – Astana stretching 1081 km. At the second stage – the Astana-Kokshetau gas pipeline with a length of 276 km. At the third stage – the Kokshetau – Petropavlovsk section with a length of 177 km. And at the final phase of the fourth stage, taking into account the projected increase in gas consumption from this gas pipeline, it is expected that the Zhezkazgan and Temirtau compressor stations will be built to increase the throughput capacity of the main gas pipeline to 3 billion cubic meters per year. In order to fill the main gas pipeline and ensure gas supply to consumers, Akimats of Karaganda, Akmola oblasts and Astana will design and build gas distribution networks, synchronizing them with the completion of the gas pipeline by July 2019.
The project will also allow the active development of infrastructure along the main gas pipeline route, create new jobs and production using natural gas. The visit also included the consideration of prospective development of the Kyzylorda-Zhezkazgan motorway.