ASTANA – Kazakhstan’s proximity to Russia, China, Central Asia and the Caspian region strengthens its role as a major gas exporter. The country’s traditional export markets are the CIS, but demand for Kazakh gas is growing in Europe as Europe looks for alternatives to Russian gas. Despite this, China remains the country’s largest gas export market.

Gas industry of Kazakhstan. Photo source: eurasian-research.org

Kazakhstan exported 5.3 billion cubic meters of natural gas in 2023; this met 85.1% of the annual target, an increase of 8% compared to 2022, when gas exports were 4.6 billion cubic meters. The decrease in total gas exports allowed for more supply in the domestic market. Total gas exports in 2021 decreased by 19.2% compared to 2020, reaching 16 billion cubic meters.

China has been the main consumer of Kazakh gas in recent years. Kazakhstan supplied 5.857 billion cubic meters to China in 2023, an increase of 15.5% compared to 5.07 billion cubic meters in 2022. Deliveries to China reached 5.6 billion cubic meters in 2021, compared to 7.37 billion cubic meters in 2020.

In the period January-August 2023, gas exports from Kazakhstan to Russia reached 3.6 billion cubic meters, up from 7.9 billion cubic meters in 2022; This represents a decrease of 2.7% compared to the previous year. While Russia bought 8.2 billion cubic meters in 2021, it bought nine billion cubic meters in 2020. One of the highest export figures was in 2017 with 14.7 billion cubic meters.

Kazakhstan’s gas exports to Uzbekistan peaked at 1.5 billion cubic meters in 2017, but fell to 400 million cubic meters in 2019 and 100 million cubic meters in 2020. No exports to Uzbekistan were recorded in 2021 and 2022.

Kazakh suppliers could not enter the Ukrainian market in 2023 as well as in 2021. In 2022, Kazakhstan exported 108.4 million cubic meters of gas to Ukraine, making a profit of $13,546 million. In 2020, gas exports to Ukraine reached 600 million cubic meters.

Gas exports to non-CIS countries showed significant growth in 2019, reaching 7.4 billion cubic meters. While exports remained constant at 7.4 billion cubic meters in 2020, Switzerland was seen to export 3.2 billion cubic meters. However, exports decreased to 6.4 billion cubic meters in 2021; This figure was still above 2022, when exports dropped to 5.1 billion cubic meters.

Kazakhstan ranks 22nd worldwide in terms of gas reserves and third among CIS countries after Russia and Turkmenistan.

Kazakhstan’s 2024 gas production target is 60.5 billion cubic meters, an increase of 2.3% compared to the production of 59.1 billion cubic meters in 2023. Production is expected to reach 91 billion cubic meters by 2030. 2022 production exceeded the target by 3.1%, reaching 53.3 billion cubic meters. . Salable gas (processed and purified gas ready for sale) reached 27.8 billion cubic meters, or 94% of the 2022 plan. Production in 2021 amounted to 53.8 billion cubic meters, a decrease of 2.3% compared to 2020; Production was 55.1 billion cubic meters, seven times higher than the 1991 level of 7.9 billion cubic meters.

In 2023, the amount of marketable gas reached 29.8 billion cubic meters. Production reached 14.9 billion cubic meters in the middle of the year, meeting 50% of the annual target. The main growth in gas production is expected to come from large fields such as Karachaganak, Tengiz and Kashagan.

Kazakhstan hosts approximately 79 gas production companies, including 23 that sell gas to the gas transmission system to meet the needs of the domestic market and for export purposes.

The role of Kazakhstan in the gas environment of Central Asia

The country is also a major gas transit hub in Central Asia, facilitating gas transportation from Turkmenistan and Uzbekistan to China and Russia. Uzbekistan’s gas shortage has allowed Kazakhstan to increase transit volumes and revenue. In 2023, Kazakhstan transported 1.28 billion cubic meters to Uzbekistan and plans to increase this to 11 billion cubic meters.

According to oil and gas expert Abzal Narymbetov, the demand for transit gas is expected to increase. Originally, the Central Asia-Central pipeline supplied Uzbekistan’s gas to Russia and Europe, but Uzbekistan’s recent shortage has led to an unprecedented decision to purchase Russian gas.

“Uzbekistan signed a $320 million deal with Gazprom in the first quarter alone, and I expect this trend to increase as Uzbekistan’s electricity sector, which depends on gas for 85% of its needs, faces increased demand. In this case, Kazakhstan has the opportunity to generate revenue from transit fees, Narymbetov told Kazinform news agency.

The switch to gas energy left Uzbekistan facing famine; Production dropped from 51.7 billion cubic meters in 2022 to 46.7 billion cubic meters last year. Meanwhile, Kazakhstan aims to protect its transit revenue by updating and modernizing the Central Asia-Central gas pipeline.

A recent agreement between the national company QazaqGaz and Turkmengaz allows the transit and sale of Turkmen gas, taking advantage of Kazakhstan’s domestic demand and export obligations. Turkmenistan’s 27.4 trillion cubic meters reserves represent an important opportunity for Kazakhstan. The country also sees potential in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project, which could expand its export market while addressing local shortages.

Kazakhstan’s Turkmen and Uzbek gas transit to China is expected to increase by 1.5 billion cubic meters compared to last year and reach 37.1 billion cubic meters this year. Negotiations are continuing to increase Russian natural gas transit to Kyrgyzstan.

Strengthening gas capacity

Talks are also ongoing to increase gas exports to China, including the potential construction of a new pipeline to increase capacity.

In 2018, Kazakhstan agreed to supply 10 billion cubic meters of gas to China annually for five years. However, achieving this goal proved difficult. Exports reached 4.4 billion cubic meters in 2022 and 5.8 billion cubic meters in 2023. Due to winter famine, Kazakhstan occasionally stops exports to prioritize domestic needs.

Kazakhstan’s gas production primarily includes associated petroleum gas, which must be refined before export. With only two processing plants, Kazakhstan cannot meet both its export obligations and local demand, so raw gas is sent to Russia for refining.

President Kassym-Jomart Tokayev in his state of the nation speech in the name Zhanaozen underlined the importance of attracting investment to accelerate the construction of new processing plants in Kashagan and Karachaganak.

Energy Minister Almassadam Satkaliyev at the government meeting on July 16 announced Plans for new processing facilities, including interest from Qatari investors.

From 2026 to 2030, four new plants are planned: two with a capacity of one billion 2.5 billion cubic meters in Kashagan, four billion cubic meters in Karachaganak and 900 million cubic meters in Zhanaozen. .

Strategic expansion

Despite capacity constraints, Kazakhstan remains committed to supplying gas to China. Following the presidential visit to Beijing, the national company QazaqGaz extended its agreement with PetroChina until 2026.

QazaqGaz national company, Chevron Corporation and its subsidiary Chevron Munaigas Inc. in collaboration with, signed Potential geological exploration contract at the Zhalibek field in Aktobe Region.

A key component of sustaining these exports is the expansion of the Beineu-Bozoi-Shymkent pipeline, which feeds the Central Asia-China pipeline. This route has an annual capacity of 15 billion cubic meters, compared to Russia’s Power of Siberia pipeline, which can handle 38 billion cubic metres. Kazakhstan plans to build a second line for the Beineu-Bozoi-Shymkent pipeline to increase capacity by 2026-2027.

Customs data show gas exports to China generated $1.467 billion last year, while Kazakhstan’s average price was $250.43 per thousand cubic meters, just below Russia’s rate of $257. Although it cannot keep up with Russia’s volume, Kazakhstan’s pricing strategy makes it competitive. Russia plans to reduce its price to China to $227.8 by 2027, concentrating the market.

The Power of Siberia pipeline, the main gas artery from Russia to China, transported 22.7 billion cubic meters last year. Plans for the Power of Siberia-2 pipeline could further strain Kazakh exports.

Kazakhstan is considering a pipeline that would pass through its territory to meet the north’s annual demand of two billion cubic meters, but Russia has chosen Mongolia as the transit route.

In July, Satkaliyev announced that Russia could supply gas to the Northern Kazakhstan and East Kazakhstan regions.

“The Ministry of Energy is considering two options for gasification of the northern and eastern regions. The first option is the expansion of gas service to Akmola and Northern Kazakhstan Regions by advancing the second and third stages of the Saryarka gas pipeline, subject to the completion of the second line of the Beineu-Bozoi-Shymkent pipeline. A feasibility study is currently being conducted for this joint project. “The second option is to supply natural gas directly from Russia,” he said.

Article originally It was published At Kazinform.