Economics, Energy, Energy Market, Forum, Gas, Gas Market

The second Forum day began with business breakfast on a topic “State regulation – an essential component for the development of oil and gas industry of the Republic of Kazakhstan” with participation of Uzakbay Karabalin, First Vice-Minister of Energy of the Republic of Kazakhstan, Baltabek Kuandykov, President of the Society of Petroleum Geologists of Kazakhstan, Bazarbay Nurabayev, Chairman of the Committee of Geology and Subsoil use of the Ministry of Investments and Development of the Republic of Kazakhstan and others.

Breakfast participants discussed issues of improving the investment climate in exploration, planning of public strategies and economic policies, the possibility of placement of the oil-and-gas companies’ securities on international stock exchanges and credits in the international (foreign) banks. Furthermore, the experience of modernization of reserves accounting system in the Russian Federation, issues of state regulation, problems occurred in the development and transition to a new system of reserves accounting were presented.

Discussion on a topic “Energy resources in the limelight of geopolitical relations” was conducted during the Plenary session. It was attended by the Moderator – Chris Burns, host of TheNetwork program on Euronews channel, and speakers – Andrew Dominic Jerea, Minister of Energy of Romania, Jam Kamal Khan, Minister of State for Petroleum and Natural Resources of the Islamic Republic of Pakistan, Anton Pavlov, Deputy Minister of Energy of the Republic of Bulgaria, Mikhail Margelov, Vice-President of OJSC “SC “Transneft”, Jim Nicholson, Senior Vice President of ArgusMediaLtd for the Asian region, Simon Flouers, First Vice President of WoodMackenzie for Corporate Research of Global Industry.

Speakers generally agreed that recently against a background of political and economic tension in the world, it is energy resources which often become a kind of lever to put pressure on one or the other opposing parties.

The EU countries are still heavily dependent on Russian gas import. Meanwhile, there are risks related to its transit through the territory of Ukraine and variable pricing which significantly increases the desire of European countries to diversify the sources of this import.

Confrontation between Russia and the EU has already led to the abandonment of Moscow to implement the “South Stream” project and the convergence of “energy relations” with Ankara that supported the Russian initiative on the formation of a new gas pipeline – “Turkish stream”. In this situation, some Eastern European countries are interested in stable supplies of Russian gas, and take new and very careful attempts to resume gas cooperation with Moscow.

Competition of gas arteries is increasing again. The routes proposed to be implemented bypassing Russia acquire particular relevance. Asian markets are becoming a serious alternative to the European gas supplies. Geopolitical ambitions are becoming a major trump card in the big energy game.

In these circumstances, it is clear that the level of applied tools of world energy modeling is clearly insufficient, and to achieve a common energy security in the regions it is necessary to act as a unified force. Moscow has already offered to create the Eurasian center of planning and design of energy development to establish equal relations with neighbors in the region. In this context, the view of other market participants is very interesting.

Andrew Dominik Jerea, Minister of Energy of Romania said that Kazakhstan and Romania are able to complete implementation of bilateral projects in the energy sector based on the intergovernmental agreement. He recalled that for Romania the Republic of Kazakhstan is the first commercial partner in Central Asia, and, in his opinion, there are “real chances to boost the bilateral trade”. The Romanian minister noted with satisfaction the growing cooperation between the parties as part of Rompetrol project, work of Petrom representative office in Almaty and other projects. Currently, Romania looks forward to continuing cooperation with the national holding company of Kazakhstan “KazMunaiGas” regarding the increase in supplies of crude oil through the Black Sea to Constanta port.

Deputy Minister of Energy of the Republic of Bulgaria Anton Pavlov who presented the transit energy potential of his country pointed out that only joint efforts of the EU states and the USA, producer countries of the Caspian region, Russia and the Middle East may ensure realization of energy resources and reliable operation of the necessary infrastructure to ensure Europe's energy security in the long run.

Having presented existing and new Russia’s oil pipeline projects, including those which are aimed at ensuring the continued supplies of oil to China, Vice-President of JSC “Transneft” Mikhail Margelov underlined that Europe remains principal direction for his country. “With regard to the ever-increasing interdependence between producer countries, transit countries, and consumer countries it is necessary to establish partner relations between all stakeholders to enhance global energy security. And the best way, in our opinion, to achieve this result is to establish transparent, efficient and competitive global energy markets,” - he said.

In turn, Jim Nicholson, Senior Vice President of ArgusMediaLtd for the Asian region, when speaking of the factors which currently affect the oil pricing in the world, drew attention to the “entirely new reality” of this process. “OPEC produces so much oil that it has never produced before,” - he said adding that the Organization of Petroleum Exporting Countries is not going to reduce its production. He noted that the lifting of Western sanctions against Iran also affects the basic price indicators. It is expected that Iran will fully return to international markets approximately in the beginning of next year. Mr. Nicholson has thus referred to Iran's Oil Minister who said earlier that one month after the lifting of sanctions this country would be able to produce about 2 million barrels of oil to the world market. The speaker called this scope as “very substantial”. He drew attention to the fact that countries outside of OPEC are also increasing oil production. Moreover, the expert considers Russia as the second largest supplier of oil and gas condensate to the world market.

In general, Senior Vice President of ArgusMediaLtd called the mood on the market at this time as “opportunistic”.

 “However, we do not think that soon we will see big jumps,” - he said.

According to the First Vice-President of WoodMackenzie Simon Flouers now companies do not have the opportunity to invest large amounts of money to new projects, “billions of potential investments till 2020 will not appear on the market”.

“Iran which has long been under pressure of Western sanctions is quite a different story. This is the third country in the world in terms of reserves. And in terms of fiscal policy we assume that Iran will be able to attract 50 billion dollars by 2025,” - he noted.

Touching a “gas” theme, Mr. Flouers said that in this regard he considers the Caspian region as the owner of “great opportunities” for the sale of gas. Moreover, the directions for its realization can be very different. In particular, he calls the route to China as promising one. “But it's not the only direction that should be considered. There is also a Western strategy”, - he added. – “Kazakhstan needs to take some commercial solutions to increase production and sales of gas,” - he concluded.

Today, Vice-Chairman of IHS, Pulitzer Prize Laureate, Daniel Yergin presented the National Energy Report KAZENERGY 2015 to the Forum participants designed to give a comprehensive picture of the current situation and prospects for development of basic sectors of the Kazakhstani economy, which in the aggregate constitute fuel and energy complex of the country. Main tasks of the report include a review of the current status of coal, oil and gas, uranium industries and areas of production, transmission, distribution, marketing and consumption of electricity and heat energy. The report also assesses the Kazakhstan’s potential on using of renewable energy sources, implementation of “green initiatives”, reduction of energy and resource intensity of the economy, including in the light of the holding in Astana the International exhibition EXPO-2017.

Participants of the program session organized in cooperation with the International Renewable Energy Agency (IRENA) discussed “Current trends in the development of clean energy”.

Is the State ready to continue to support such projects amidst the crisis (the Governments of Italy, Spain, Portugal, Great Britain, Romania, Czech Republic, Bulgaria have already taken a decision to reduce the volume of subsidizing renewable energy projects)? What are the prospects of “green technologies” and renewable energy sources in the future? Will Kazakhstan be able to become a leader in renewable energy development in the region? These and other important issues have been discussed by Mohamed Elfarnawany, Director of Strategic Planning Department – Head of Staff of IRENA, Bakhytzhan Dzhaksaliyev, Vice-Minister of Energy of the Republic of Kazakhstan, Mohamed Moussa Omran, First Deputy Minister of Electricity and Energy of Egypt, Levon Shahverdyan, Deputy Minister of Energy and Natural Resources of Armenia, John Woods, Vice President of MinasEnergy (Canada), Deger Saygin, Program Coordinator – Road maps of renewable energy sources of IRENA Center of innovations and technologies, and Nigel Jolands, Senior Manager for Political Affairs of the EBRD.

Kazakhstan is implementing investment projects in the electric power industry in order to cover deficit of electric power and provide new opportunities for socio-economic development of regions. By 2030 investments in electricity generation in the country are estimated at 54 billion dollars in case of implementation of the basic scenario of the industry development and at 36.5 billion dollars in case of conservative scenario.

Nuclear energetics starts a new stage of development after nearly 60 years of its operation. Following the accident at the Fukushima nuclear power plant some countries scaled down their nuclear programs, while others (such as Russia and Kazakhstan), on the other hand, started to work actively to promote the idea of ​​nuclear power plants and implement the project of a nuclear power plant construction in Kazakhstan.

In addition, solar and wind power plants, small hydropower plants are put into operation in our country. Kazakhstan is preparing to host international specialized exhibition EXPO 2017 “Future Energy”.

However, due to problems in the global economy, investments in renewable energy sources are diminishing in the world. Investors again focus their attention on the traditional energy assets. Therefore, Kazakhstan should soberly assess the risks that come with excessive enthusiasm for alternative energy. In addition, it should be remembered that “green” electricity is not a cheap pleasure. So far manufacturers of “green” electricity survive thanks to a favorable tax regime, tariff preferences and direct government subsidies.

The final program session of the Forum was devoted to the theme “Potential of the downstream sector for the future economic growth of Kazakhstan”. Klaus Pete Helsing, Vice-President of Fluor B.V., Askhat Omarov, Chairman of the Board of LLP “United Chemical Company”, Gabit Zakaria, Chairman of the Board of LLP “Polymer Production”, Galymzhan Amanturlin, Director of the Department – Advisor to the Director General – expert of “KazMunayGaz – processing and marketing”, Dominique Lavigne, Director for activities with government agencies and the public of the International Association of Methanol Producers (MI), and Romein Roux, General Director of Romain ROUX, Axens KGNT EnergyEfficiciency discussed the prospects of development of petrochemical industry in Kazakhstan, the issues of modernization and technological re-equipment of existing refineries, energy saving using pinch analysis in refineries and other issues.

In their reports speakers stated that the oil trajectory takes into account the necessity for a gradual displacement of industry focuses towards the organization and development of higher added value productions. This will help to pass stagnation without much noticeable time losses in the economy. Asian countries actively stimulate the development of petrochemical industry with a focus on research and development activities, clusters, infrastructure and know-how. Governments of these countries are willing to heavily invest in the development of centers of oil refining and petrochemistry. At the same time Asia is a source of technologies and intellectual resources in the industry.

In Kazakhstan downstream sector is also one of the main directions of economic diversification. The country is on the cluster path, attracting considerable assets to this segment, Asian and Western technologies and experience. Large-scale modernization is carried out in refineries of the republic. A modern gas-chemical complex is being built in the west of Kazakhstan.

It is expected that effective functioning of the created cluster will provide multiplicative growth of related industries, creation of small and medium-sized enterprises around the major projects, as it was in Indonesia, Iran, China.

The X KAZENERGY Eurasian Forum has ended with the Ceremony of awarding partners of the KAZENERGY Association, as well as with adoption of the Forum’s Resolution (please, see text on the Forum's website: http: //kazenergyforum.com/).

For further information, please contact:

Press Service of KAZENERGY Association

[email protected]

Tel.+77172 790181