Kazakhstan refines its oil strategy

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Reliance on hydrocarbons is increasing. While the government talks about diversification the reality is much greater emphasis and visible progress in expanding oil and gas activities.
Kashagan output rising steadily. The country produced an average of 1.73 mln barrels of oil per day last year, up by 10.5% from 2016. Most of that extra oil came from the Kashagan field, which finally started producing in late 2016 and will soon plateau at 370,000 barrels per day. Total Kazakhstan production is set to reach at least 2.15 mbpd by 2023. Kazakhstan is out of the OPEC deal.
Plans to boost crude exports and refining. Kazakhstan’s plans for the extra oil are a combination of more crude exports and the processing of more oil to boost supply of high-quality products.
Major refineries have/are being upgraded. The three major refineries have undergone major modernization programs or are near completing them. Partly this is to boost output of gasoline, diesel and other fuels and also to improve the quality to Euro-5 standard. The government plans to partially privatize all three refineries as part of the restructuring and privatization of KMG.
Fourth refinery still being considered. President Nazarbayev has again recently called for the building of a fourth refinery to move the country towards self-sufficiency and to add more valuable exports but the timetable keeps slipping. The feasibility study is expected in October-November.
Still to decide on a new oil pipeline. The question of where and how to export the extra oil is also yet to be decided. The decision, which is subject to intense political lobbying by the US, the EU and China, is expected sometime in 2019.
In talks to sell 20% of KazMunaiGaz (KMG) to Shell. It is reported Shell has been offered a 20% stake in KMG ahead of the privatization of the company, planned for 2019.
New legislation affecting foreign investors. The president signed the Subsoil Use legislation in late December and it will take effect from 1 July. It offers incentives for new investors in the oil and gas sector but existing investors have to comply with new regulations and procedures.
Promising more gas to China and to Astana. President Nazarbayev has promised to supply gas to Astana and the neighboring region by end-2019. It is not clear where this extra 2.5 bcm of gas will come from. Kazakhstan has also signed a deal to supply China with 5 bcm of new gas exports.
EBRD loans US$250 mln for renewables. It is reported that the EBRD has agreed to loan Kazakhstan US$250 mln to develop renewable energy sources as part of the program to move to clearer energy and to create diversification in supply.