Kazakhstan set to boost business with China



Kazakhstan authorities have announced plans to scale up partnerships with China National Petroleum Corporation (CNPC) after years of prioritising investments and co-operation with Western and Russian oil players.

State-owned investment vehicle Samruk-Kazyna said it will fully support CNPC’s plans to invest in expanding the capacity of oil and gas pipelines in Kazakhstan and to build a sour gas processing plant for the Kashagan offshore development.

Additionally, Astana expects CNPC to get involved in an upgrade project at Shymkent — one of the three oil refineries in the country — aiming to double its processing capacity to more than 90 million barrels per annum.

Samruk-Kazyna holds the Kazakh government’s controlling stake in the country’s fourth-largest oil and gas producer, KazMunayGaz.

It also homes the state’s shareholdings in gas transmission operator and gas producer Qazaqgaz and several other large corporations that operate in the country.

Samruk-Kazyna said CNPC is set to team up with KazMunayGaz to work on increasing the throughput capacity of the oil trunklines from Kenkiyak to Atyrau and from Kenkiyak to Kumkol by 125,000 barrels per day and 104,000 bpd, respectively.

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The projects will allow some oil produced in Kazakhstan’s western and northwestern regions by three largest Western-led developments — Tengiz, Kashagan and Karachaganak — to be diverted to China.

All three projects currently bring their output to Atyrau where it enters a major export artery running across Russia to a marine terminal near the port of Novorossiysk, which is operated by Caspian Pipeline Consortium with the Russian government holding a 31% stake.

Last year, Kazakhstan President Kassym-Jomart Tokayev ordered Kazakh companies to urgently consider alternative export routes to reduce the country’s dependence on Russian oil transit after its neighbour was hit with international sanctions.

Samruk-Kazynahas also backed CNPC’s plans to work jointly with Qazaqgaz on the construction of a second line of the Beyneu–Bozoy–Shymkent gas pipeline that will boost the existing capacity of the network by 15 billion cubic metres per annum.

Both sides have to complete a feasibility study for the pipeline project and determine possible sources of financing by end of this year.

The expansion of this gas line will also increase Chinese gas export opportunities for Kazakhstan.

Additionally, Samruk-Kazyna has rubber-stamped Qazaqgaz and CNPC’s proposal to build an onshore processing plant in the Atyrau region capable of taking up to 4 Bcm of associated sour gas from the Kashagan oil project.

The plant would reduce the amount of unused sour gas that Kashagan has to pump back into the reservoir. Authorities hope the facility will produce network natural gas and liquefied petroleum gas. Kasakhstan’s consumption of LPG as a motor fuel has shot up in recent years.

Earlier this month, KazMunayGaz said Chinese player Sinopec is to become its partner in large-scale exploration efforts on promising Kazakh hydrocarbon blocks.

Appraisal and exploration activities are set to begin later this year at Zharkyn, Bolashak, Northern Ozen, Berezovsky and Mugadzhary and will continue until 2025.

Before the end of this year, KazMunayGaz and Sinopec will also investigate starting joint exploration work at seven other large blocks offered by Kazakhstan.

Both companies will also consider teaming for exploration activities at several other acreages that have not been studied before.

Oleg Chervinsky, publisher of Kazakhstan’s oil industry magazine Petroleum, said: “Today, China is a source of investment for Kazakhstan, a sales market, an alternative export route and a counterbalance to the main geopolitical players all rolled into one.

“Also, it should not be forgotten that President Tokayev began his career at the Soviet Embassy in Beijing.”