Kazakhstan is the largest oil producer in Central Asia and a major gas producer. Most gas is associated with oil production, and around one-third is reinjected in order to boost liquids output. Production of both oil and gas is dominated by three international projects that began operations in the 1990s.
Kazakhstan has been successful in attracting the interest of major international investors in its oil and gas sector. However, a worldwide trend towards decarbonisation is making oil and gas companies more selective about developing new acreage. Given Kazakhstan’s relatively high development costs for new upstream projects, coupled with long export routes, attracting investment is increasingly expected to depend on ensuring that fiscal and other policies are internationally competitive.
Around 80% of oil is exported. Almost all exports pass through Russia, mainly via the Caspian Pipeline Consortium (CPC) pipeline to the Black Sea port of Novorossiysk. A smaller pipeline to China is currently underused, while minor volumes are sent by tanker across the Caspian Sea to Azerbaijan, where they can enter the Baku–Tbilisi–Ceyhan pipeline. Diversification of export routes is important for securing the flow of oil and gas to lucrative export markets, which provide important revenue for the Kazakh treasury.
Following a major refinery refurbishment programme, completed in 2018, Kazakhstan is essentially self-sufficient in oil products. However, very low domestic prices for oil products relative to those of its neighbours have led to unauthorised exports, in turn leading to periodic domestic shortages for some products.
Kazakhstan has been successful in rapidly expanding its domestic gas network. However, increasing gas supplies to meet domestic consumption and export goals appears to be a growing challenge. More attractive prices for gas may provide incentives for producers to sell more of it, as well as to explore for and develop new sources of supply for the government’s ambitious plans to expand gas consumption.