New market study, "Kazakhstan Oil & Gas Report Q3 2013", has been published

From: Fast Market Research, Inc.
Published: Thu Jul 11 2013

Our outlook for Kazakhstan remains broadly optimistic, although we underline growing risks related to resource nationalism and geological complications on major prospects that could deter foreign investors. ConocoPhillips' recent divestment of its Kazakh assets further strengthens our expectation that IOCs could move away from the country's hydrocarbons market. We expect strengthening ties between Kazakhstan and China, based on the increasing diversity of the latter's energy supply.

The main trends and developments we highlight for Kazakhstan's oil and gas sector are:

* Kazahstan has been strengthening its trading ties with China. Kairgeldy Kabyldin, head of KazTransOil, seems to have made a clear choice, as he declared in early March plans to increase oil exports to China by one-fifth in 2013. Developing ties with Chinese companies will most likely help Kazakhstan develop the necessary infrastructure to transport fuel eastward. However, this move may create further uncertainty on the potential interference of the government in the hydrocarbons sector.
* KazMunaiGas (KMG)'s acquisition of a 10% stake in the Karachaganak gas and condensate project for a total pre-tax consideration of US$3bn, including US$1bn in net cash and the settlement of outstanding legal claims against the operating consortium, is a positive move for the foreign companies involved. The deal removes many of the legal uncertainties surrounding their operations in the country and opens the door to the long-delayed third phase of development, which will boost output from the field.
* We forecast that the estimated 2012 gas output of 11.2bn cubic metres (bcm) will rise to 15.2bcm by the end of 2017. Infrastructure bottlenecks and delays to key decisions with regard to associated gas have forced us to moderate our assumptions. The country's exports are also declining. Our demand forecasts see consumption reaching 16.6bcm in 2017, creating increasing risk that the country will have to rely on imports.
* State oil and gas group KMG believes the Kashagan field expansion could be completed by 2018-2019 - despite government concerns over spiralling costs. Output at Kashagan - with expansion having been repeatedly delayed - will reach about 370,000b/d during first-phase expansion and rise to 450,000b/d by 2015 or 2016.
* According to Oil and Gas Minister Sauat Mynbayev, oil output hit 80.10mn tonnes per annum (tpa), equivalent to 1.61mn b/d, in 2011. The government expects production to hit 90.00mn tpa, or 1.81mn b/d, by 2015, with production levels sustained at 120-130mn tpa (2.41-2.61mn b/d) from 2020 onwards. This is above our forecasts, which see output reaching 1.99mn b/d in 2016 and 2.17mn b/d in 2020.

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