AFTER SO MANY years of dependence on foreign ! goodwill for the export of its oil, gas and mineral: the Kazakh government is insisting on a control stake in the new Kazakhstan Caspian Transport System (KCTS). This is designed to carry export pipelines south to a new port at Kuryk, south of Aktau, entirely through Kazakh territory.
New high-capacity pipelines within this corridq will run south for hundreds of kilometres from tilt giant, city-sized processing plant for Kashagan oil gas at Eskene, 30km north of the oil capital Atyrau, to a new port at Kuryk. From there oil and gas will be transported across the Caspian Sea to Baku. The new trunk pipelines running down the corridor will also be linked up to the many smaller fields being developed either side of the route.
The oil companies, which are expected to foot most of the bill for this multi-billion dollar project, however, are still smarting from their loss of control over the CPC pipeline through Russia, which they also financed and initially operated. As the main financiers and big future users of the KCTS, the international oil companies want to ensure that they retain as much influence as possible over future managements.
A conclusion to months of hard bargaining between -government and the oil companies had not been reached at time of writing, but a compromise deal is expected shortly.
The main purpose of the KCTS is to ensure that western Kazakhstan has the export capacity to cope with the expected doubling of oil and gas production when the Kashagan field comes on stream in four years’ time. It will ensure that rising oil and gas production from the country’s three biggest fields – Kashagan, Karachaganak and Tengiz – as well as dozens of smaller fields in western Kazakhstan will flow down pipes, ports and railways under Kazakh jurisdiction and not require transit payments to foreign governments.
The KCTS will constitute a major strategic resource for Kazakhstan, which used to be totally dependent on transit through Russia to reach export markets but is now rapidly developing into a major transit country in its own right, with high-capacity pipelines running 3,000km east to China and hopes of developing further routes south through Iran – international politics permitting.
The new corridor will not only carry Kazakh oil and gas to Kuryk. It is also expected to accommodate up to 30 billion cubic metres a year of gas flowing north from Turkmenistan to Russia. But building this northbound pipeline is conditional on implementation of an agreement signed in 2007 between Russia, Kazakhstan and Turkmenistan. This was to enable Russia to raise gas imports from Central Asia. But Moscow seems to be reviewing this agreement in the light of a sharp decline in demand for gas from Gazprom’s recession-hit domestic and European consumers.
On past performance, the end result of current negotiations between the Kazakh government and oil companies over how the KCTS corridor is to be managed is likely to be a compromise that leaves both sides reasonably satisfied. The expected benefits from the new corridor are, after all, huge for all concerned.
From the Eskene processing plant, equivalent in size to the city of Amsterdam, the corridor will terminate at Kuryk, a sheltered, relatively deep-water site chosen for the large new oil and gas export facility. From there a fleet of oil tankers will ferry oil some 700km across the Caspian Sea to new importing h facilities south of Baku, the capital of Azerbaijans
At some point in the future, gas may also be transported under the Caspian in pipelines and President Nazarbayev has also expressed his interest in a possible liquefied natural gas (LNG) facility to freeze natural gas and transport it in special LNG ships across the Caspian to a de-freezing plant on the Azeri shores.
Eskene, which is some 35km north of Atyrau, will process oil from the offshore Kashagan field, and three other smaller fields in the concession are currently being developed by Exxon-Mobil.
The complex will start operating when the first oil comes from Kashagan around the fourth quarter of 2012. Production will then build up rapidly as Kashagan alone is expected to produce some 1.5 million barrels a day before the end of the next decade. The hot, corrosive oil which forces its way to the surface from the Skm-deep deposits needs to be stripped of deadly hydrogen sulphide and other poisonous gases as well as foul-smelling mercaptans and other pollutantss
These involuntary by-products of making the oil and gas safe for transport will be used as feedstock for a proposed $6.5 billion petrochemical plant, which the government is discussing with deep-pocketed investors from the Gulf States.
Invest in Kazakhstan An official publication of the Government of the Republic of Kazakhstan, 2009. Pages: 52-53.