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A project of ample opportunities
The act of businesses helping local
communities and companies and
sponsoring activities that would benefit
them in the long run is quite common.
The consortium that is developing the
giant Kashagan field is no exception in
this regard. It is committed to developing
a world-class project in a manner that
will bring long-term benefits for residents
of Atyrau and Mangistau regions and the
Republic of Kazakhstan as a whole.
Since the very start, the consortium
under the North Caspian Sea Production
Sharing Agreement (NCSPSA) has
aspired to be not just a company
developing one of the biggest oilfields
worldwide, but also the company that
is committed to maximising the use
of local goods and services, developing
the skills of local people and helping to
increase the capacity of local companies
in a sustainable manner. More than
$11 billion paid by the venture for local
goods, works and services in 2006-2014
demonstrates our commitment.
In line with the NCSPSA, the venture
gives preference to local suppliers
provided they meet safety and quality
requirements and offer materials and
services competitive with those provided
by international suppliers. In order to
compete successfully with a foreign
company, a local company must have
a skilled workforce and comply with
■
international safety and quality standards
for products manufactured and services
provided. To help local businesses meet
these criteria, the venture developed
a long-term programme that sets out
specific goals. Between 2006 and
2015, the venture awarded international
certificates to 96 local companies,
thus enabling them to obtain an edge
over their competitors, step up their
production capacity and promote
their goods and services. Three local
companies are under the certification
process for ISO standards, and 37 more
are currently being trained.
In 2014, the venture conducted
eight general awareness seminars
(HSE awareness, tender writing,
pre-qualification awareness, QA/QC
and so on) for 81 local companies.
More than 200 employees from 12 local
companies have been trained in the
most in-demand craft skills such as the
safety processes of scaffolding works,
gas facilities operation and maintenance
engineering, industrial safety, work at
heights, electrical safety and others.
Although this is a time-consuming effort
(training and introduction of standards
at a company may sometimes take more
than a year), compliance with these
standards offers multiple advantages
for potential suppliers, enabling them
to promote their goods and services
consistent with international practices,
both at home and abroad. To date, more
than 2,000 Kazakh firms actively involved
in performing various kinds of work
and services and in supplying goods
are currently registered in the venture’s
database. One example of successful
local-company engagement in the project
was the launch of the Akku-1 and Akku-2
vessels in Aktau, or the construction of
a large number of onshore facilities,
like the first 80,000-cubic-metre crude
storage in Kazakhstan.
By virtue of its innovation and technical
complexity, the project requires utmost
professionalism from its staff, and among
its undoubted achievements is the fact
that the number of local residents working
on the project has been increasing from
year to year. As of 4Q14, 82 per cent of
staff working for the Kashagan project
are Kazakhstani citizens, compared with
77 per cent in 2013; an outstanding level
for this type of project.
The consortium also helps local
communities via its social infrastructure
projects (SIP), and sponsorship and
donation (S&D) programmes. Between
1998 and 4Q14, more than 942 social
infrastructure projects were completed in
Atyrau and Mangistau oblasts, in close
collaboration with local authorities. The
total spent on the SIP projects in 2014
alone came to $43 million. S&D projects
are very specific, and in Mangistau and
Atyrau regions more than $1.5 million
was spent on nurseries, secondary
schools, colleges, libraries, hospitals,
social adaptation centres, and disabled
and veteran groups.
OIL AND GAS
The crossroads
of Central Asia
Linking China and Europe with Central Asia, Kazakhstan is an
important transit corridor for natural gas and oil. Various projects
are now underway to enable it to adapt to changing demand
ITAR-TASS PHOTO AGENCY/ALAMY
K
azakhstan has a crude oil distillation capacity of
345,100 barrels per day (b/d). There are three
refineries: Pavlodar, Atyrau and Shymkent, which
are all owned and operated by national operator
KazMunayGas Group (KMG). KMG also has a 75 per cent
share in Romanian company Rompetrol, which operates
in a number of European countries, primarily in refining
and trading, providing KMG with an integral overseas
well-to-customer cycle, involving the trading and shipping
companies of the KMG Group.
Domestic demand in the country has been rising quickly in
recent years, spurred by strong economic growth. In December
2014, President Nursultan Nazarbayev reaffirmed the plan to
build a fourth refinery. In the meantime, Atyrau, Pavlodar and
Shymkent have been expanded and refurbished, and output
from the three refineries was up by nearly nine per cent in
2014, with an estimated 17.4 million tonnes of oil refined,
compared with 16 million tonnes in 2013.
This is still, however, less than a quarter of Kazakhstan’s
crude output, and, while other oil exporters seek to add value
to exports through refining, in Kazakhstan refining remains
largely limited to domestic demand, owing to protected
neighbouring markets and logistical obstacles to exporting,
resulting from the country’s huge size and landlocked position.
Until recently, the Shymkent and Pavlodar refineries were
supplied with crude from western Siberia, but, in 2014,
Kazakhstan replaced five million tonnes of this with its own
crude. The delays at Kashagan (see page 60) have resulted
in the displacement of crude supply to China, with exports
thought to have fallen in 2014, from a record 12 million
tonnes in 2013. The 2013 figure was up 14 per cent on that
from 2012, reflecting China’s efforts to diversify its crude oil
import options, and Kazakhstan’s broadening export base.
Kazakhstan has also increased the transit quota for
Russian crude to China to seven million tonnes, and is
The Karachaganak-Uralsk gas pipeline was completed in 2011. Domestic demand
has risen in recent years, propelling the need for new pipelines and refineries
expected to raise it to 10 million tonnes in 2015. The
deal, alongside its transit role in gas sales, illustrates the
importance of Kazakhstan as a crossroads in Central Asia.
Overall, a total of 67.2 million tonnes of oil were transported
through the KazTransOil system in 2013, with 72.1 million
tonnes expected to have been carried in 2014. A project to
increase the transportation capacity of the 1,400km CNPC/
INVEST IN KAZAKHSTAN 2015
55
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OIL AND GAS
The Karachaganak-Uralsk gas pipeline
is 148km long and connects the Karachaganak gas condensate field with the
country’s pipeline network. It was completed in 2011 and cost about $300 million
SOURCE: HYDROCARBONS TECHNOLOGY
The Caspian Pipeline Consortium (CPC) pipeline
extends for 1,500km from the Tengiz field to Novorossiysk, Russia. In 2013,
it transported an average of 706,000 barrels of crude oil per day
SOURCE: CHEVRON
The Atasu-Alashankou oil pipeline
runs for 963km from Kazakhstan to north-east China. First-phase capacity of
10 million tonnes per year will rise to 20 million tonnes per year
SOURCE: KAZMUNAYGAS
Atyrau-Samara oil pipeline
is a major export route to markets in North-West, Central and Eastern Europe, as well
as to ports in Primorsk, Ust-Luga and Novorossiysk.
In 2013, it transported around 15.4 million tonnes of oil
SOURCE: KAZMUNAYGAS
KMG Atasu-Alashankou pipeline to 20 million tonnes a year
from 12.5 million tonnes will help transport more Kazakh and
Russian oil to China across Kazakh territory as volumes rise.
The Friendship (Druzhba) Pipeline is now available to take
Kazakh supplies west through Russia, although the delays
at Kashagan mean that Kazakhstan does not yet have the
crude oil to fill it. Currently, exports flow through Baltic and
Black Sea ports, via the Caspian Pipeline Consortium (CPC)
and Atyrau-Samara pipeline, as well as the Kazakhstan-China
pipeline. Kazakhstan also sends up to 500,000b/d by tanker
across the Caspian for onward transportation through the
Baku-Tbilisi-Ceyhan (BTC) pipeline. Supply to the BTC
pipeline will eventually be boosted by the Kazakhstan Caspian
Transportation System (KCTS), which includes a 600,000b/d
pipeline from western Kazakhstan to a new 760,000b/d
oil terminal on the Caspian. Other proposals include the
Trans-Caspian oil pipeline, which would provide another
western export route for both Kazakhstan and Turkmenistan.
Focus on gas: strong economy fuels demand
Kazakhstan exports some gas and also acts as
a transit country for gas pipeline exports from
Uzbekistan and Turkmenistan to Russia and China.
There are two main transit lines: the Central AsiaChina Pipeline (CACP), which brings gas from
Turkmenistan and Uzbekistan via Kazakhstan to
China; and the Bukhara-Urals Pipeline, which
transports gas from Uzbekistan to Russia. A third,
25-billion-cubic-meter-per-year (bcm/year) CACP
pipeline (line C) was completed in 2014 alongside
the existing two 1,883km, 30bcm CACP lines (lines
A and B), with a fourth project, line D, planned
along an alternative route to complete the system.
Lines A and B are supplied with up to 30bcm
per year from the Amu Darya field and other projects
in Turkmenistan. Kazakhstan will supply five bcm
a year to line C, along with another 10bcm each
from Turkmenistan and Uzbekistan. Under a 2012
framework agreement, Turkmenistan agreed to
supply China with 65bcm a year, with line D likely to
eventually transport 25bcm a year from Galkynysh.
A strong economy means that demand has been
increasing at home, too, requiring the expansion of
Kazakhstan’s domestic pipeline network, including
the 10bcm Beineu-Bozoi-Akbulak pipeline, which
is due on stream in 2015. This will connect the
INVEST IN KAZAKHSTAN 2015
separate distribution systems in the west and
south, and help supply exports to China. Another
proposed pipeline will supply gas from Russia and
Karachaganak to northern and central Kazakhstan,
and Astana, ensuring that the country’s energy riches
are available to more domestic consumers.
As well as transportation improvements and
strong demand, stricter regulations are spurring gas
processing and utilization. Kazakhstan now has 14
gas processing plants, with a total capacity of
19bcm/year – and another 4.6bcm/year ready or
under construction as part of the Kashagan project,
as well as plans for a gas-to-liquids plant.
57
Russia
Chinarevskoye
Field
Darzhinskoye
field
YuzhnoGremyachenskoye field
North-western Kazakhstan
Rostoshinskoye
field
Uralsk
KEY
Border
Gas pipeline
Nostrum gas pipeline
Nostrum oil pipeline
Oil pipeline
1P Reserves
195
571m boe
199
192
169
2010
2011
2012
2013
2014
Production
44,400
boepd
7,671
2010
Gas Treatment Facility (GTF)/
Oil Treatment Facility (OTF)
2P Reserves
192m boe
192
Nostrum Oil loading rail
terminal at Rostoshi
582
539
522
506
2010
2011
2012
2013
571
2014
Distribution
per common unit
46,178
44,400
36,940
US$0.35
0.32
0.34
0.35
2012
2013
2014
13,158
2011
2012
2013
2014
Simple
Sustainable
Successful
Who we are
Nostrum Oil & Gas PLC is an independent oil and gas
company engaging in the production, development and
exploration of oil and gas in the pre-Caspian Basin through
our operating subsidiary Zhaikmunai LLP.
We are a simple, sustainable and successful organisation
with the vision to become the leading independent oil and
gas exploration and production company in the CIS.
A simple investment case
• Stable financial platform with strong
cash flows and flexibility
• Over half a billion of 2P reserves
• Steady levels of production
• World-class assets
• Simple business case, successful model
and sustainable strategy
• Strong governance and responsibility
• Experienced management team
Nostrum Oil & Gas PLC
www.nostrumoilandgas.com • [email protected]