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Kazakstan
Energy
Kazakstan is well endowed with energy resources, including abundant
reserves of coal, oil, and natural gas, which made the republic
one of the top energy-producing regions of the Soviet Union. In
1993 Kazakstan was the second largest oil producer, third largest
coal producer, and sixth largest natural gas producer among the
former Soviet republics. Industry in Kazakstan is dominated by
the energy sector; in 1994 electric power generation accounted
for 19 percent of GDP, and fuel extraction and processing accounted
for nearly 23 percent. Thus, the national economy is strongly
affected by changes in levels of fuel extraction and energy production
(see fig. 6).
Oil
Kazakstan's oil reserves have been estimated at as much as 2,100
million tons, most of which is in relatively new fields that have
not yet been exploited. In addition, new offshore discoveries
in the north Caspian more than replaced the annual drawdown of
known reserves in the early 1990s. In 1993 Chevron Oil made an
initial investment in a joint venture, Tengizchevroil, to exploit
the Tengiz oil fields at the northern end of the Caspian Sea in
what was envisioned as the leading project among foreign oil investments.
Recoverable reserves at Tengiz are estimated at 25 billion barrels,
or about twice the amount in the Alaskan North Slope, although
Tengiz oil is extremely high in sulfur. The French firm Elf-Aquitaine
has leased about 19,000 square kilometers of land in the Emba
region northeast of the Caspian, where there are known to be large
quantities of sulfur-free oil and natural gas. Other oil deposits,
with paraffin, asphalt, or tar (all harder to process), have been
found in the Caspian Sea near Novyy Uzen and Buzachiy.
Oil production, which increased by an average of 3 percent per
year through 1991, reached a peak production of 26.6 million tons
that year before output began to decline in 1992. The most productive
region in the early 1990s was the Mangyshlak Peninsula on the
east shore of the Caspian Sea. In the early 1990s, Mangyshlak
yielded more than 50 percent of the republic's oil output before
experiencing a decline of 11 percent in 1992. Kazakstan also is
known to be rich in deposits of heavy oil, which currently are
not commercially viable but which are potentially valuable.
The republic planned to increase its oil exports from the 7.8
million tons of 1992 (15 percent of total exports) to as much
as 37 million tons in 1996 (50 percent of total exports), for
which anticipated revenue was about US$2.9 billion. By 1993, however,
domestic and CIS industry conditions made such goals unrealistic.
The most important obstacles to increased oil production and export
involve Russia. In 1994 Russian refineries in western Siberia,
upon which Kazakstan's oil industry continues to rely heavily
for processing, cut their operations drastically because paying
customers could not be found; this cut resulted in the plants'
lower demand for crude oil from Kazakstani suppliers. Thus, in
the first nine months of 1994, Kazakstan's oil sales fell to 4.5
million tons from 8 million tons in the same period of 1993, and
production for the year fell 11.7 percent. Because of the oil-exchange
agreement with Russia, the cutback in Russian refinery production
also reduced domestic refinery production nearly 25 percent in
1994.
The second obstacle to greater production and export of oil
is pipeline access through Russia to Western customers, which
Russia has curtailed because of capacity limits and political
maneuvering. The lack of pipeline facilities caused Chevron to
announce substantial capital investment cutbacks in the Tengiz
oil fields for 1995. In the mid-1990s, the pipeline that connects
Kazakstani oil fields with the Russian Black Sea port Novorossiysk
provided the sole access to the oil of the Tengiz fields for Chevron
and its Western customers (see Transportation and Telecommunications,
this ch.). The uncertainties of relying on the existing Russian
line or on a second line passing through the war-torn Caucasus
region led to discussions of new pipeline projects passing through
Iran or even eastward across China to the Pacific Ocean. In September
1995, a new agreement with Turkey laid plans for pipelines crossing
Georgia to ports in Georgia and Turkey, providing a new outlet
possibility for Kazakstan's Tengiz oil. Also, in October 1995
Kazakstan joined in a new consortium with Russian and United States
companies to build a pipeline to the Black Sea. Chevron and Mobil
Oil of the United States, British Gas, Agip of Italy, and Russia's
LUKoil enterprise were to fund the entire pipeline project in
return for a 50 percent share in the pipeline. The governments
of Kazakstan and Russia were to receive the other 50 percent.
However, pipeline construction was delayed amid further international
negotiation over alternative routes.
In the first quarter of 1995, major accidents and power shortages
at drilling sites reduced production by about 10 percent compared
with output in the first quarter of 1994. Refinery output in that
period was even lower; only about half the first quarter's oil
was refined, and the Pavlodar refinery closed entirely because
it received no crude oil from Russia.
Natural Gas
Kazakstan has enormous reserves of natural gas, most notably
the giant Karachaganak field in the northwest near the Russian
border, under codevelopment by a consortium of Agip of Italy,
British Gas, and the Russian Natural Gas Company (Gazprom). In
1992 natural gas production was 8.5 million cubic meters, half
of which came from Karachaganak. By 1994, however, production
was only 4.1 million cubic meters because Russian consumption
had dropped drastically in the early 1990s. A 1995 deal with Gazprom
gave that organization part ownership of Karachaganak in exchange
for a guaranteed purchase of natural gas from Kazakstan. Foreign
investment projects at Tengiz and Karachaganak were expected to
triple domestic gas output and enhance gas processing capabilities
in the later 1990s. The usefulness of increased output depends
on new pipeline agreements--still in the formative stage in 1996--with
Russia and other countries in the region.
Coal
In 1994 coal production decreased 6.7 percent to 104.4 million
tons, after a production peak of 140 million tons was reached
in 1991. About thirty major coalfields exist, most of them within
400 kilometers of Qaraghandy in north-central Kazakstan. This
region offers some of the most accessible and cheaply extracted
coal in the CIS; however, most of Kazakstan's coal is high in
ash. The largest open-pit mines are located in the Ekibastuz Basin
northeast of Qaraghandy. According to estimates, presently exploited
mines contain 100 years of coal reserves at today's rate of consumption.
Coal is a key input for industry; in the early 1990s, more than
75 percent of coal consumption in Kazakstan went to thermoelectric
stations for power generation, and another 14 percent went to
the steel industry. In the early 1990s, Kazakstan exported about
40 percent of its coal to CIS customers, mainly Russia.
The coal industry has been plagued by poor management and strikes
that shut down major underground operations at Qaraghandy and
surface operations at Ekibastuz in 1994 and 1995. The large metallurgical
works of Qaraghandy, built under the Soviet concept of the territorial-industrial
complex combining heavy industry with on-site fuel reserves, has
been forced to curtail production when strikes are called.
Current Fuel Supply and Consumption
Despite its fuel endowments, Kazakstan remains a net importer
of energy, partly because of falling production in the early 1990s
and partly because of remaining barter agreements from the Soviet
era. Undeveloped east-to-west transportation infrastructure has
prevented efficient supply of domestic fuels to industries, which
are energy intensive. As a consequence, Kazakstan still must import
oil, natural gas, lubricating oil, gasoline, and diesel fuel from
Russia, which in the postindependence years has taken advantage
of its neighbor's vulnerability to economic pressure. In the mid-1990s,
the oil exchange system between Kazakstan and Russia meant that
declining demand in Russia reduced availability of those Russian
products to Kazakstan. In 1994 Russia sent only 40 percent of
the crude oil and 48 percent of the refined products prescribed
in the bilateral agreement for that year. Gas imports showed a
similar drop.
The national electric power system is divided into three grids.
The northern grid, which serves a large part of heavy industry,
is connected to the adjacent Siberian grid in Russia, and the
southern grid is connected to the Central Asian System. Kazakstan
depends on Russia for electricity and fuel. Although the Siberian
generating stations that supply the northern grid are located
in Russia, they are fired largely by coal exported from Kazakstan.
Some electric power also is received from Kyrgyzstan's hydroelectric
stations to the south in exchange for coal (see Energy, ch. 2).
In 1991 Kazakstan consumed 101.6 billion kilowatt-hours of electricity
(84.7 percent of which was produced domestically), making it a
relatively heavy energy consumer among nations of its economic
stature. About 85 percent of domestic generation occurs in coal-fired
thermoelectric plants. A few thermoelectric plants use natural
gas or oil; the remaining 15 percent of energy comes from those
plants and from hydroelectric stations. The main sources of coal-generated
electricity are the fields of Ekibastuz, Maykubin, Torghay, and
Borlin. There are three large hydroelectric stations, at Bukhtarmin,
Öskemen, and Kapchagay. The republic's one nuclear power station
is located near the city of Aqtau.
Data as of March 1996
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