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Unlocking Kazakhstan's Energy Potential: Investing in Oil and Gas Stocks
Oct. 22, 2024 01:00PM PST
Oil and Gas Investing
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Kazakhstan ranks 12th globally in oil reserves. China invests heavily, leading to growth in production and exports, making it an attractive investment location.
Kazakhstan ranks 12th in the world with 1.8 percent of the world’s supply of proven oil reserves. Most of its oil deposits are in the western part of Kazakhstan near the Caspian Sea, in the Precaspian and the Mangistau basins.
The country’s favourable position in Central Asia, situated between Russia and China, has meant significant investment in the country by China since its independence thirty years ago. Currently, approximately 20 percent of the oil Kazakhstan produces is transported via pipeline to China.
The recent geopolitical tension between Russia and Ukraine has led to investment moving from Russia and Belarus to Kazakhstan. The Kazakh government, led by President Kassym-Jomart Tokayev, has been actively promoting the message that Kazakhstan is open to foreign investment and the country continues to comply with the terms of Western sanctions set against Russia. The result is that Kazakhstan is now regarded as an attractive location for investment and has been a major beneficiary of the relocation of Western investment from Russia.
The Kazakh territorial area in the Precaspian Basin is 500,000 square kilometres. It‘s the most valuable basin in Kazakhstan, where more than 200 fields have been discovered.
Since its independence 30 years ago, Kazakhstan’s oil production has increased close to 3.8 times, with annual output of 84.2 million tons. Most of that production comes from major oil and gas projects in Tengiz, Karachaganak, and Kashagan. Of the sizable oil production of 84.2 million tons in 2022, roughly 76 percent is exported, which underscores its decisive position in the global oil market.
Key oil producers in Kazakhstan
Chevron (NYSE:CVX) leads Tengiz’s oilfield production, which saw a slight decline of 1 percent in 2023, with an average of 630,100 barrels per day (bpd). Tengiz has been a significant contributor to Chevon’s revenues for a number of decades and the company continues to make significant investment in the Tengiz field.
Approximately 80 km offshore Atyrau in the North Caspian Sea, Kashagan was the first shallow-water offshore oil field development project in Kazakhstan. The oilfield was developed and is operated by North Caspian Operating Company (NCOC), a joint venture of the state-owned KazMunaiGas, Shell (NYSE:SHEL), Adani Total Gas (NSE:ATGL), Eni, ExxonMobil (NYSE:XOM), CNPC, and Inpex (TYO:1605). NCOC is the operating company for the North Caspian Sea Production Sharing Agreement (NCSPSA).
The largest of the country’s oilfields, the Karachaganak field, produced approximately 259,770 barrels per day, a 7 percent increase on 2023 production. It is owned and operated by Karachaganak Petroleum Operating, a consortium of Eni, Royal Dutch Shell (LON:SHEL), Chevron (NYSE:CVX), Lukoil (RUS:LKOH), and KazMunaiGas.
In the Mangistau, two of Kazakhstan’s significant Soviet era oilfields, Uzen and Zhetybai, are still in operation having produced approximately 5 billion barrels of oil since discovery. Major operators in the Mangistau include KazMunaiGas and MangistauMunaiGas (MMG).
The history of oil production means that the infrastructure in this region is also well developed. The Beineu-Shymkent Gas Pipeline project runs across the Mangystau, Aktobe, Kyzylorda and Turkestan oblasts. Joint ownership is held by KazTransGas JSC of Kazakhstan and Trans-Asia Gas Pipeline from China.
The importance of junior explorers
Jupiter Energy (ASX:JPR) is an oil exploration and production company engaged in advancing its onshore assets in West Kazakhstan. Jupiter holds 100 percent of the Block 31 exploration permit in the Mangistau Basin, with the licence area being in close proximity to the large Zhetybai oilfield, and close to the port city of Aktau. The company has been producing approximately 600 to 700 barrels of oil per day across three oilfields, with 1 production well on the Akkar North (East Block) field, 1 production well on the West Zhetybai field and 2 production wells on the Akkar East field.
The Company has successfully completed its Exploration Licence period and a recent western PRMS/SPE audit confirmed that the Company’s exploration drilling program had led to the discovery of 2P recoverable reserves of approximately 36.5 million barrels of oil (mmbbls).
The transition from explorer to producer
Jupiter Energy has now moved into its Production Licence period with the three oilfields having rights to full commercial production through to 2046 (Akkar North [East Block]), 2045 (Akkar East) and 2046 (West Zhetybai).
As part of the move into full commercial production, the company is required to build the requisite infrastructure to provide for 100% utilisation of all associated gas produced during oil production,
With the support of the Kazakh Ministry of Energy, Jupiter and its larger neighbour MMG, have agreed to work together to develop a solution to gas utilisation that not only benefits Jupiter and MMG but also local communities in the Mangistau. MMG is a 50/50 joint venture between KazMunaiGas and Chinese state owned CNPC and is a major employer of human resources, supporting many communities in the region.
Jupiter has constructed the necessary infrastructure that will allow all wells on the Akkar North (East Block) and Akkar East oilfields to tie into MMG’s existing gas utilisation infrastructure, and during 2025 will construct pipelines to also connect the West Zhetybai oilfield into MMG’s infrastructure.
The project is significant in that it is a demonstration of how the associated gas byproduct of oil production can be more effectively and efficiently captured and used to benefit both the operators and the local community, whilst helping Kazakhstan meet its long-term carbon-free objectives.
Key takeaway
As global energy demands evolve and the world transitions towards cleaner energy sources, Kazakhstan's oil and gas industry faces both challenges and opportunities.
The country's commitment to modernization and decarbonization, coupled with its vast resources, suggest it will continue to play a crucial role in shaping the future of the global energy landscape.
By facilitating the development of smaller companies from explorers to producers, the country will reap the benefits of the adaptability and innovation they bring to oil exploration and discovery.
In addition, such cooperation ensures that larger producers, with oilfields at a more mature stage of their life, can get access to by-products such as associated gas in an efficient and cost effective manner and, perhaps most importantly, any surplus gas output can be directed towards helping local communities keep their energy costs down.
This INNSpired article is sponsored by Jupiter Energy (ASX:JPR). This INNSpired article provides information which was sourced by the Investing News Network (INN) and approved by Jupiter Energy in order to help investors learn more about the company. Jupiter Energy is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.a
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Jupiter Energy and seek advice from a qualified investment advisor.
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