• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 14 mins GREEN NEW DEAL = BLIZZARD OF LIES
  • 7 days They pay YOU to TAKE Natural Gas
  • 4 days How Far Have We Really Gotten With Alternative Energy
  • 4 days What fool thought this was a good idea...
  • 7 days Why does this keep coming up? (The Renewable Energy Land Rush Could Threaten Food Security)
  • 2 days A question...
  • 13 days The United States produced more crude oil than any nation, at any time.
Oil, Gas Activity in U.S. Holds Steady

Oil, Gas Activity in U.S. Holds Steady

The total number of active…

Traders Ditch Bullish Bets on Oil

Traders Ditch Bullish Bets on Oil

A continuously fading war risk…

Global Risk Insights

Global Risk Insights

GlobalRiskInsights.com provides the web’s best political risk analysis for businesses and investors. Our contributors are some of the brightest minds in economics, politics, finance, and…

More Info

Premium Content

Kazakhstan Moves Towards Becoming A Top 10 Oil Producer

Kazakhstan President

Recently, a group of oil companies led by Chevron announced a $36.8 billion investment deal for the development of Kazakhstan’s Tengiz oil field. The sizable new investment is virtually unprecedented in the prevailing low-priced oil economy. For Astana, only a small number of major projects have been cemented in recent years — and this is the largest of the year so far.

As ambitious and daring as this investment is for oil companies, it also brings a great deal of risk and opportunity for Kazakhstan. Increased production and exportation will influence relations with its powerful neighbors, and in turn become a key component of the developing trans-Asiatic trade environment.

Astana has increased its oil output annually over the last 3 decades, increasing from 59.5 to 81.8 million tons per year between 2004 and 2014 alone. This increase is a part of Kazakhstan’s plan to reach 130 million tons per year by 2020, though infrastructural issues have slowed growth.

Kazakhstan and the oil economy

In 2014 Kazakhstan was the world’s 15th largest producer of oil, and this year’s investment will bring it substantially closer to the top 10. The country will continue to become a more important source of global oil, as its proven reserves totaled 30 thousand million barrels in 2014. This will increase energy competition with Russia and the Middle East, while also forcing Kazakhstan to contemplate its dependence upon other countries’ oil purchases.

62.3 percent of Kazakhstan’s economy is accounted for by crude and refined petroleum. By far its biggest customer is China, whose 2014 purchases accounted for roughly 25 percent of Kazakhstan’s oil economy. As the world has seen through the interdependence of Russia and Europe’s energy economies, asymmetric dependence can have substantial effects on policy.

Implications for Kazakhstan’s trade strategy

This presents both a risk and an opportunity for Kazakhstan, which stands to gain a great deal from China’s One Belt One Road initiatives, but must also protect its economic independence throughout Asian economic shifts.

The state of relations with China has not gone unnoticed by the Kazakh government, which developed policies such as the 2050 strategy to properly navigate shifts like One Belt One Road and development of the Silk Road. The true test will be whether Kazakhstan is able to balance both political and energy relations with China, which could wield its economic influence in Central Asia for political motives. On the other hand, Kazakhstan’s considerable borders with China and Russia will continue to be a major pathway for the coming Silk Road, providing a very strong position in overall East-West relations. Related: How Much Does The U.S. Spend Per Day On Petroleum Products?

Kazakhstan’s geographic location will become an increasingly important factor as the Silk Road develops from East Asia through Central Asia and the Middle East to Europe. Roadblocks in Kazakh-Chinese relations could prove detrimental to trade with the West, which would be subject to any new trade tariffs or taxes in Central Asia.

Increased investment into Kazakhstan may also place a focus on Kazakh-Russian relations. Kazakhstan is the second largest oil producer of the former Soviet Union, and relations between the two are historically stable. Kazakhstan tends to be predicatively pro-Russian, but as it gains its own economic might and independence, it risks aggravating its Northern neighbor. Russia benefits, and will continue to benefit, from Kazakhstan’s economic growth, so long as Kazakhstan retains its amicable relationship.

Looking Forward

To properly interpret the Kazakh-Russian relationship, it will be important to watch the growth and expansion of both countries’ energy sectors. Both have developed complex relations with China and remain heavily dependent upon its purchases.

The further rise of Kazakhstan’s production may become a roadblock in relations with Russia, depending upon how the Kazakh government utilizes its growing influence. The potential for economic competition between the two countries will increase, as the two wrestle for clients in Asia, Eurasia and Europe.

ADVERTISEMENT

Therefore, as the coming investment unfolds, risks and rewards lie within Kazakhstan’s relations with its large neighbors — as well as its geographic placement in the future of trans-Asiatic trade. Kazakhstan lies at the crossroads of many influences. Its success in economic diversification with the coming oil boom will be instrumental to both its own independence, as well as the fluidity of trade in the region.

By Jonathan Hoogendoorn via Global Risk Insights

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News