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Kazakhstan to Solidify Caspian Energy Role

By Daniel J. Graeber | Thu, 16 August 2012 22:42 | 0

Kazakhstan is expected to start making deliveries from its giant Kashagan oil field by the middle of next year. The state-controlled consortium managing the field set a production benchmark of 1 million barrels of oil per day before the end of the current decade. Deliveries from the field are expected to run through existing pipeline networks in Russia or from maritime shipping. Production rates should be slow at the onset, but, with OPEC expecting significant growth outside of the cartel, Caspian states like Kazakhstan are expected to solidify the region's position among global energy players.

The U.S. Energy Department, in a monthly report, said it expects total Kazakh oil production to reach 200,000 bpd in 2013 when the Kashagan oil field starts commercial production. State-run Kazmunaigas expects production levels to start off at around 300,000 bpd during the initial phase before reaching 1 million bpd as early as 2018. Production from the offshore Kashagan field in the Caspian Sea is expected to contribute to the country's plans to increase oil production by more than 20 percent by 2015.

The country holds about 3 percent of the world's recoverable oil reserves. Once production starts, the controlling consortium at Kashagan aims to deliver oil through existing pipeline networks in Russia and by ship through the Caspian and Black Seas and ultimately to Mediterranean ports.

The Organization of Petroleum Exporting Countries expects non-OPEC supply to increase by 700,000 bpd in 2012.  This source is expected to add another 900,000 bpd by next year in part by projected increases from Kazakhstan, as well as the Americas and the Sudans. In terms of production from the former Soviet Union, OPEC said specifically that oil supply should increase by 110,000 bpd to 13.3 million bpd, though that’s a slight decline from previous estimates. OPEC said Russia's oil supply is expected to drive most of the growth for the region, though Azerbaijan and Kazakhstan could contribute to long-term increases in oil production from the region.

Human rights groups have expressed concern over the trial of opposition leaders and an oil worker convicted in Kazakhstan of launching a labour strike illegally.  Oil workers and police forces in Zhanaozen near the Caspian Sea clashed in December. At least 15 people were killed and more than 100 others were injured when police allegedly opened fire on striking oil workers in the city in some of the worst violence the country has experience since the collapse of the Soviet Union in 1991.

Oil companies, however, have displayed a tolerance for working in countries with poor human rights records. Compared with lingering fighting in Libya and political disputes in Iraq, Kazakh concerns are relatively minor. Lingering territorial concerns between Iran and littoral states to the Caspian Sea may inhibit some development in the region. In terms of the broader geopolitical context, however, the region has played an integral role in geopolitical manoeuvring among members of the European Union and Russia given the expectations from the Shah Deniz natural gas field in Azerbaijan's waters. Despite early obstacles and political squabbling, Kazakhstan should help solidify the Caspian region as a major energy-producing region come 2013.

By. Daniel Graeber of Oilprice.com

About the author

Contributor
Daniel J. Graeber
Company: Oilprice.com
Position: Senior Analyst

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