New Energy market report from Business Monitor International: "Kazakhstan Oil & Gas Report Q4 2012"

Boston, MA -- (SBWire) -- 12/06/2012 --BMI View: Our outlook for Kazakhstan remains broadly optimistic, although we underline growing risks tied to resource nationalism.KMG's acquisition of a 10% stake in Karachaganak will greatly improve the upstream environment, particularly for the IOCs involved in the project, but other examples of growing state control over the sector point to a worrying trend.

The main trends and developments we highlight for Kazakhstan's oil and gas sector are:

- Protests and strikes in late 2011 in the oil-rich province of Mangystau, which accounts for about 30% of Kazakhstan's estimated 1.63mn barrels a day (b/d) of production output, have now completely died down and the majority of the oil workers fired by KazMunaiGas (KMG) have been reinstated. The movement had a minimal impact on the country's oil and gas sector: there were no reports of foreign operators being affected and even KMG suffered just a 7% fall in annual output. The strikes failed to spread to Kazakhstan's pre-Caspian basin where about 60% of the country's resources are located. The reappointment of Prime Minister Karim Massimov and of Oil and Gas Minister Sauat Mynbayev following January's parliamentary elections further indicates policy continuity in the hydrocarbons sector.
- KMG's acquisition of a 10% stake in the Karachaganak gas and condensate project for a total pre-tax consideration of US$3bn, including US$1bn in net cash and the settlement of outstanding legal claims against the operating consortium, is a positive move for the foreign companies involved. The deal removes many of the legal uncertainties surrounding their operations in the country and opens the door to the longdelayed third phase of development, which will boost output from the field.
- We forecast that the estimated 2011 gas output of 12.26bn cubic metres (bcm) will rise to 15.79bcm by the end of 2016. Infrastructure bottlenecks and delays to key decisions with regard to associated gas have forced us to moderate our assumptions. However, the country is still set to become a major gas exporter. Our demand forecasts see consumption reaching no more than 12.13bcm in 2016, providing export potential of 3.66bcm.
- State oil and gas group KMG believes the Kashagan field expansion could be completed by 2018-2019 - despite government concerns over spiralling costs. Former CEO Bolat Akchulakov has argued this would be subject to Shell and other partners agreeing on a development concept by the beginning of 2012.
- Output at Kashagan - with expansion having been repeatedly delayed - will reach about 370,000b/d during first-phase expansion and rise to 450,000b/d by 2015 or 2016, Oil and Gas Minister Sauat Mynbayev said on October 4 2011.

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