Kazakhstan

Oil and gas condensate supplies from Kazakhstan -next to Azerbaijan the main- stay for Caspian oil production- exceeded 1.3 million barrels per day in 2007. In the nineties Kazakhstan set a standard in pursuing market and democratic reform in Central Asia. Kazakhstan now accommodates significant investment in its vast upstream oil and gas resources and government forecasts predict that oil exports could reach as much as 3.5 million barrels per day in 2015. Nonetheless oil output growth has slowed down for the first time in 2004 and state involvement has increased.

Engineering challenges posed by new off shore development in the Kazakh section of the Caspian Sea, as well as policy shifts that impact on the investment and commercial climate both contributed to this slowdown in output growth. From a macro economic perspective, this may be explained by the adoption of a more moderate depletion policy to protect other sectors of the Kazakh economy against negative impacts of the oil and gas boom (e.g. effects of currency appreciation on other sectors known also as the ‘Dutch disease’ or ‘Resource curse’). On the other hand, the slowdown might be caused by uncertainties over the remaining export and transit conditions for new Kazakh oil and gas production to cross transit corridors to world markets. Nevertheless these uncertainties should not be overstated.

Kazakhstan already has access to a range of diverse export options through Russia, and via the Caspian Sea through the South Caucasus to the Mediterranean, and via swaps with Iran to the Arabian Sea as well as to China through a recently installed pipeline. Mainly as a function of rising oil and gas condensate production, Kazakhstan will also become an important producer of associated gas, that could be in the order of 35 bcm by 2015. It remains to be seen, however, how much gas will be freed for export as opposed to use for re-injection to maintain field pressure in oil production or to meet its ambitions for a domestic petrochemical industry.

Concerning international energy sector governance, Kazakhstan is a member of the Energy Charter Treaty and the Extractive Industries Transparency Initiative which set important international standards for policy cohesion and rule of law in the energy sector and for revenue management respectively. Kazakhstan is an observer country seeking to become full member of the World Trade Organisation that also sets further standards for energy sector commerce.