Kazakhstan’s Countrywide Gasificaiton Initiatives are under Threat!

Kazakhstan enjoys abundance of energy resources, including natural gas. Yet, having possessed nearly 2 trillion cubic meters of gas, the production level in the country is rather limited. Kazakhstan consumes only half of its produced gas and exports the other half, because it lacks extensive internal gas supply networks to transport it within the country. Gas shortages in some areas are compensated by swap deals with Russia and Uzbekistan. In an attempt to reduce its dependence on external suppliers and meet growing domestic demand the government has introduced a country gasification program. The current crisis in the oil market and the emerging financial challenges, however, affect authorities’ capability to promote gasification initiatives.

There are two guiding documents to determine and implement projects designed to promote gasification of the country: a) the General Scheme of gas supply for 2015–2030; and, b) the Concept of development of the gas sector until 2030. According to the General Scheme of gasification the government is planning to boost the number of people connected to the gas supply system from the current 7 million in 1150 localities to 10 million people in 1600 localities by 2030.^[1] Once the gasification program is implemented the consumption level in Kazakhstan will double and reach 18 billion cubic meters of gas in 2030, against current 10.9 billion cubic meters. In a broader context, gasification initiatives are being carried under the State Programme of Accelerated Industrial and Innovative Development.^[2] Once the projected initiatives are implemented, the government expects to reach 56 percent of gasification in the country by 2030 as was announced by the Vice Minister of Energy of the Republic of Kazakhstan Bakytzhan Dzhaksaliyev during the 48^th meeting of the CIS Electric Energy Council in Almaty.^[3]

The government has experience in carrying out quite similar workload in terms of extending the in–country gasification networks. Over the course of the past decade the authorities implemented more than 130 provincial gasification projects, thus pushing up the number of localities connected to the gas supply systems from 728 to 1150^[4] which currently accounts for around 32 percent of the countrywide gasification rate.[5] And now 7 million people enjoy access to gas in Kazakhstan. The next stage, however, would require hundreds of billions of Tenge of investment, if the authorities want to reach the goals set up in the General Scheme and the Concept of development of the gas sector. Energy officials in March 2015 highlighted that the cost of the gasification program until 2030 is estimated in the amount of 656 billion Tenge, the sum that will most likely go up along the way of implementing the series of projects.^[6]

Gas imports from Uzbekistan for the southern regions of Kazakhstan (Zhambyl, South Kazakhstan and Almaty region) and from Russia to Kostanay region cover up 30 percent of the domestic gas supplies. Currently, “KazTransGas” JSC (through subsidiaries – “KazTransGas-Aimak” JSC, “KazTransGas-Almaty” JSC) delivers gas to consumers in Almaty city, Akmaty, Atyrau, Aktobe, East Kazakhstan, Zhambyl, West Kazakhstan, Kostanay, Kyzylorda, Mangistau and South Kazakhstan regions.^[7] The gasification program aims to increase availability of gas in all regions, but most importantly capital city–Astana.

Figure 1: The level of gasification of the Republic of Kazakhstan regions

According to the gasification program Astana is supposed to go all the way from zero to 100 percent gasification rate in the upcoming 15 years. Good times for the economy of Kazakhstan, however, has passed and now it would be quite challenging for authorities to implement the country program on gasification. Recent announcement by the energy officials highlighted serious challenges that the authorities will face along the way toward reaching 56% of country gasification rate by 2030.

Galym Nurgaziev, a head of the department of the gas sector development of the Ministry of Energy of the Republic of Kazakhstan, has recently announced that all the Astana gasification projects are now postponed. According to him there are two main projects designed to connect Astana to the gas supplies: a) construction of the gas pipeline from Kostanay region – “Kartaly–Tobol–Kokshetau–Astana”; and, b) establishing gas pipeline network, which is designed to deliver gas to the Southern regions and China – “Bozoi–Beneu–Shymkent–Kyzylorda–Zhezkazgan–Temirtau–Astana”. “For the first project, the implementation cost has already been calculated. For the second project, technical and economic estimations have been conducted. Both projects, however, are now postponed for undetermined period,” said Nurgaziev.[8]

Authorities were expecting to attract external private investment in linking the Bozoi–Beneu–Shymkent gas pipeline to Astana and construction of four gas fired thermal power plants along the way when “KazTransGaz” signed a memorandum with Independent Power Corporation PLC. Apparently, the authorities overestimated the contribution of the non–binding memorandum to the gasification process of Kazakhstan. Besides, the Beineu–Bozoy–Shymkent gas pipeline, capable of supplying its gas to southern regions, is also expected to fill the Central Asia–China gas pipeline (CAGP), in which China has not only taken part, but also covered most of the construction expenses. Chinese interests in moving gas out of the region may overshadow Kazakhstan’s desire to supply a sufficient amount of gas to its southern regions and in this case to Astana.

Gasification of the country is a priority energy policy for the government. However, dropped prices for oil, on which Kazakhstan’s economy is so highly dependent, affected government’s capability to implement numerous projects in a number of strategically important sectors of development. The fact that the projects designed to bring gas to the capital city are now being postponed highlights the seriousness of the problem. It might be expected that various gasification projects in other regions of the country would also either be frozen or cancelled until the economic situation is resolved.

[1] Government of the Republic of Kazakhstan, “Kazakh Vice Minister of Energy Magzum Mirzagaliyev speaks at press conference in the CCS,” Government.kz, December 7, 2015,

http://www.government.kz/en/novosti/29785-gas-pipeline-beineu-bozoi-shym…

[2] Kenes Dandybayev, “Gasification in Kazakhstan Expected to Grow Significantly, Says Energy Official,” Astanatimes, March 18, 2015, http://astanatimes.com/2015/03/gasification-in-kazakhstan-expected-to-grow-significantly-says-energy-official/

[3] Ministry of Energy of the Republic of Kazakhstan, “Level of Gasification of Kazakhstan to Reach 56% by 2030,” Energo.gov, November 18, 2015, http://en.energo.gov.kz/index.php?id=3895

[4] Kenes Dandybayev, “Gasification in Kazakhstan Expected to Grow Significantly, Says Energy Official,” Astanatimes, March 18, 2015 http://astanatimes.com/2015/03/gasification-in-kazakhstan-expected-to-grow-significantly-says-energy-official/

[5] “General gasification scheme to satisfy needs of Kazakhstan population in gas,” Prime Minister of Kazakhstan official website, May 28, 2014 https://primeminister.kz/news/show/24/generalnaja-shema-gazifikatsii-dol….

[6] Kenes Dandybayev, “Gasification in Kazakhstan Expected to Grow Significantly, Says Energy Official,” Astanatimes, March 18, 2015 http://astanatimes.com/2015/03/gasification-in-kazakhstan-expected-to-grow-significantly-says-energy-official/

[7] KazTransGas, “Structure,” KazTransGas official website, http://www.kaztransgas.kz/index.php/en/main-page/structure.

[8] Oleg Chervinskiy, “Astana will be left without gas,” Ratel.kz, March 20, 2016,

http://www.ratel.kz/raw/astana_ostaetsya_bez_gaza/

Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.