|GENERAL BACKGROUND |
Kazakhstan has the Caspian Sea region's largest recoverable crude oil reserves, and its production accounts for approximately two-thirds of the roughly 1.8 million barrels per day (bbl/d) currently being produced in the region (including regional oil producers Azerbaijan, and Turkmenistan). Kazakhstan also has Central Asia's largest economy, and its nominal gross domestic product (GDP) grew by 33 percent in 2004, to $39.0 billion, resulting in a per capita GDP of $2,615 (roughly comparable to Honduras and Vietnam). This marked the sixth consecutive year of significant economic growth in Kazakhstan since its independence in 1991.
Kazakhstan's growing petroleum industry, which accounts for roughly 30 percent of the government's revenues and about half of its export revenues, has driven the country's recent economic growth. Several economic research efforts conducted in 2002 and 2003 highlighted the growing danger of possible "Dutch Disease", or over-reliance on the oil sector. Large influxes of foreign currency can distort exchange rates and ulitmately hinder growth in the non-energy sector. Some analysts were predicting that without more investment into the country's non-oil sectors, economic growth in the next decade could falter. However, a recent report by the IMF cites "impressive" growth in the non-oil sector that could help avoid oil-related growth problems.
In an effort to reduce Kazakhstan's exposure to price fluctuations for energy and commodities exports, the government created the National Oil Fund of Kazakhstan. As of the end of June 2005, the National Fund held $5.2 billion.
Kazakhstan's President, Nursultan Nazarbaev, has been involved in the country's politics since 1977 when he served as Secretary of the Central Committee of the Communist Party of Kazakhstan. In April 1990, Nazarbaev became interim president of the newly independent Republic of Kazakhstan, and was later elected to the post in the country's first national elections, held in December 1991. Nazarbaev was re-elected in 1999, after a 1995 referendum extended his term, and will be up for reelection again in 2006. The Kazakh executive branch was re-shuffled in June 2003 when then-Prime Minister Imanghaliy Tasmaghambetov resigned from his position. A new Prime Minister, Daniyal Akmetov, was appointed along with a new cabinet, including numerous holdovers from the previous administration. Parliamentary elections were held in 2004, during which the party led by Dariga Nazarbaev, the president's daughter, won 11 percent of the vote. Opposition parties have alleged that authorities committed election fraud, and one month after the elections were over, the speaker of the parliament resigned because he accused the election of being "manipulated."
Kazakhstan sits near the northeast portion of the Caspian Sea and claims most of the Sea's biggest known oil fields. Kazakhstan's combined onshore and offshore proven hydrocarbon reserves have been estimated between 9 and 29 billion barrels (comparable to OPEC members Algeria on the low end and Qatar on the high end). Kazakhstan recently completed a new assessment of its oil reserves and estimated proven and probable oil reserves at approximately 29 billion barrels. The country's earlier assessment in the 1990s estimated reserves at approximately 16 billion barrels. The country is no longer a minor world oil exporter as it was during the late 1990s, and it is poised to become an even more significant player in world oil markets over the next decade.
Kazakhstan produced approximately 1.22 million barrels per day (bbl/d) of oil in 2004 and consumed just 224,000 bbl/d, resulting in net exports of almost 1 million bbl/d. The Kazakh government hopes to increase production levels to around 3.5 million bbl/d by 2015. This would include approximately 1 million bbl/d from Kashagan, 700,000 bbl/d from Tengiz, 600,000 bbl/d from Kurmangazy, and 500,000 bbl/d from Karachaganak. Other smaller fields would account for the balance. Kazakh oil exports are growing rapidly, with current infrastructure delivering it to world markets via the Black Sea (via Russia), the Persian Gulf (via swaps with Iran), as well as some additional traffic northward to Russia via pipeline and rail. Please see the November 2004 report of the IMF for an expanded oil production discussion for Kazakhstan.
Between 1999 and 2004, Kazakhstan's oil production grew by about 15 percent every year, resulting in nearly a doubling (roughly) of oil production (see Fig 1, DATA). Most recently, the first six months of 2005 showed a slower, 10 percent production growth year-over-year. The slower rate of growth may be attributed to government restrictions on associated gas flaring or to new restrictions to production-sharing agreements (PSAs).
Increased oil production in recent years has been the result of an influx of foreign investment into Kazakhstan's oil sector. International projects have taken the form of joint ventures with Kazmunaigaz (formerly Kazakhoil), the national oil company, as well as production-sharing agreements (PSAs), and exploration/field concessions. The country expects the majority of the growth will come from four enormous fields: Tengiz, Karachaganak, Kurmangazy, and Kashagan.