Almassadam Satkaliyev, the Kazakh Minister of Energy, provided a detailed explanation on the perspectives for the development in the energy sector and the most significant projects in the upcoming years.
To help readers understand why the partnership between Romania and Kazakhstan is important, please tell us what is production oil and gas in Kazakhstan and if there are prospects for growth in the near future (2024-2025). Can OPEC decisions influence Kazakhstan's oil and gas sector?
It is extremely important to ensure a balance in the world oil market, considering the objectives of all parties involved.
We think that the Organization (OPEC) successfully plays its key-role in this process.
For its part, the Republic of Kazakhstan undertakes every effort to fulfill its obligations under the OPEC+ Agreement, including reducing oil production from our country's important fields.
At the same time, necessary measures are applied to increase the investment attractiveness in the oil and gas industry, for the evolution of the available resource base, for the development of new oil and gas fields, but also in the hydrocarbon production segment.
What is the country's policy regarding attracting foreign investors in these areas?
We take measures to increase the investment attractiveness of the oil and gas industry to increase the resource base, develop new oil and gas fields and process hydrocarbons.
To attract foreign investments, the Government of the Republic of Kazakhstan outlined the necessary measures for the adoption of an improved framework contract model for the use of mineral resources.
The improved contract model refers to new offshore, onshore and gas fields. It includes certain tax facilities and important rules related to regulation on the market. The new regulatory conditions include the stability of contractual terms, the possibility of turning to international or Kazakh arbitration, the free choice of crude oil exports from offshore or gas fields, and a simplified transition from the exploration stage to the production stage. The new tax conditions include a temporary exemption from property tax, a simplified tax regime called the "alternative mineral resources use tax", a temporary exemption from customs duty on oil exports and an increase in the depreciation limit from 50% to 200%, for capital investments.
One of the goals recently announced by the President of Kazakhstan is aimed at increasing and diversifying oil export routes. Could you please specify, what is their situation and medium and long-term goals (CPC, Atyrau-Samara-Novorossiysk, Atyrau-Samara-Ust-Luga, Baku-Tbilisi-Ceyhan pipeline)?
A significant part of Kazakh oil exports transits Russian Federation (CPC, Atyrau-Samara and Makhachkala-Novorossiysk pipelines). These transportation routes provide the best indicators of economic profitability for crude oil companies.
At the same time, maintaining existing routes, especially ensuring the reliable operation of the Caspian Pipeline Consortium (CPC), remains a priority for Kazakhstan to ensure uninterrupted oil exports.
There was completed the project aimed to remove blockages on the CPC section in Kazakhstan (the capacity increased from 53.7 to 72.5 million tons per year).
In 2022, 51.98 million tons of Kazakh crude oil were transported through the CPC oil pipeline; in 2023, 56.6 million tons were transported, whereas the planned production in the Republic of Kazakhstan being 90.5 million tons.
At the same time, a significant part of the export volumes of Kazakh crude oil transported through the CPC sea terminal is delivered to big global consumers.
Given the planned increase in production at the Tengiz and Kashagan sites, but also taking into account the further expansion of the CPC, availability for increasing delivery volumes up to 81.5 million tons per year is ensured, including the Kazakh section – up to 72.5 million tons per year.
2050 has been established as the deadline for reaching “zero emissions” objective. What does this strategy look like and what are the most important actions?
The climate change agenda become one of the most important challenges for the energy industry worldwide and a new culture of humanity. Ambitious decarbonization goals, achieving carbon neutrality, tightening regulations and measures to limit greenhouse gas emissions will all have a significant impact on the energy sector in many countries.
The Republic of Kazakhstan is committed to complying with international agreements to combat climate change and reduce greenhouse gas emissions, because it understood that the world is on the threshold of significant changes in the energy sector. In this sense, the country takes active measures aimed at the development of renewable energy sources.
In Kazakhstan, a concept of transition to a green economy was adopted, according to which the share of renewable energy sources in electricity production will reach 15% by 2030, 50% by 2050 (also taking into account alternative energy sources), and carbon neutrality is estimated to be achieved around 2060.
In this sense, we aim to increase the capacity of renewable energy sources.
From 2024, Kazakhstan supplies oil to Germany, in addition to Romania and Austria. Is there an increase in exports to the European Union? Which countries are taken into account?
Traditionally, Kazakh oil is mainly exported to the EU market (Italy, France, the Netherlands, Romania, Spain, etc.).
For 2024, it is technically possible to transport Kazakh oil, through the Transneft system, via the Druzhba main pipeline in the direction of the Schwedt refinery to Germany in the same volumes of up to 1.2 million tons per year. The German side has confirmed its interest in increasing the volumes of crude oil delivered to 2 million tons per year.
Starting February 2023, deliveries of Kazakh oil began via the Atyrau-Samara oil pipeline to Germany for the Schwedt refinery, and then, through the Transneft oil pipeline system, through the Adamova Zastava oil delivery point to Germany.
Considering the situation in the last month of 2023, there were transported 993,000 tons to Germany. The German side expresses its interest in increasing the volume of Kazakh oil deliveries to 200,000 tons per month (2.4 million tons/year).
The results of 2023 showed that the export of Kazakh oil to European Union countries was 46.6 million tons, while the total export of Kazakh oil amounted to 70.5 million tons or 66% of the total export of crude oil from Kazakhstan.
Kazakhstan continues to be among the top exporters of oil to the countries of the European Union. The data show that in 2021, our country exported 49 million tons of crude oil to Europe, and in 2022 – 45 million tons, in 2023 – 52 million tons.
The Republic of Kazakhstan is a reliable supplier to Europe, contributing to its energy security. In this context, we are interested in expanding this cooperation. The main consumers of Kazakh oil in Europe are Italy, Holland, Greece, France, Turkey and Spain.
The most relevant and current example is the signing, with the participation of the Minister of Transport of Kazakhstan - Marat Karabaev, on January 31, 2024 in Bucharest, of the Memorandum of Understanding between the Ministry of Transport of the Republic of Kazakhstan and the Ministry of Transport and Infrastructure of Romania regarding cooperation in the transport sectors and infrastructure.
What can you tell us about the Trans-Caspian International Transport Route (TITR) project, which starts in Southeast Asia and China, passes through Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and on to European countries?
Considering the increase in oil production and the commissioning of new offshore projects in the medium term, we are working on the development of additional transport routes, including in the TITR direction.
As part of the development of the Trans-Caspian international transport corridor, KazMunayGas and SOCAR expressed their mutual interest in increasing the transit volume in the BTC direction to 2.2 million tons per year (1.5 million tons + 0.7 million of tons).
Development of the Trans-Caspic international corridor:
An agreement was reached on the transportation of Kazakh oil through BTC in the amount of 1.5 million tons;
There were purchased two new oil tankers– “Taraz” and “Liwa” - with a draft of 8,000 tons.
There were signed a number of agreements on the transit of Russian oil:
- to China (100 million tons, for 10 years);
- to Uzbekistan (550,000 tons, for 2024, according to the request of the Republic of Uzbekistan).
Implementation of the project to expand the capacity of the Atyrau-Kenkiyak (from 6 to 15 million tons per year) and Kenkiyak-Kumkol (from 10 to 20 million tons per year) oil pipeline, after developing a feasibility study and signing an intergovernmental agreement between Kazakhstan and China within the Project "Expanding the production capacity of the PKOP company”.
The possibility of using the Baku-Supsa pipeline, whose flow capacity is 5 million tons per year, is being analyzed.
Generally, discussions in this direction continue with all interested parties.
At the end of June 2022, Kazakhstan created its own oil grade – Kazakhstan Export Blend Crude Oil (KEBCO). How did external partners receive this brand?
In order to identify the buyers of Kazakh oil, starting from July 2022, KMG introduced KEBCO (Kazakhstan Export Blend Crude Oil), a type of crude oil that reflects the image of the particular oil of Kazakh origin, on the international market.
The qualitative characteristics of Kazakh KEBCO crude oil, transported through the Russian transport systems, through the ports of Ust-Luga and Novorossiysk, have not changed and are similar to the technical ones of the URALS brand.
In this system “Transneft” ensures the stability of the quality and chemical composition of the transported crude oil.
Exported Kazakh oil, in terms of its technical parameters, also meets the requirements for processing at European refineries, which corresponds to the URALS brand.
The Partnership between Kazakhstan and Romania
Romania is the main partner of Kazakhstan in Europe, where the Kazakhs own the KMG International Group (Rompetrol). Through the national company of Kazakhstan (KazMunayGas), oil is delivered to refineries in Romania, where petroleum products are refined, which are later distributed in the region, both through Rompetrol gas stations and with the help of other commercial partners.
The Romanian state is a partner in Rompetrol Rafinare alongside KMG/Rompetrol, with a 44.7% share (Rompetrol Rafinare owns the Petromidia Navodari and Vega Ploiesti Refineries), as well as 20% in the Kazakh-Romanian Energy Investment Fund.
How would you define the strategic partnership between Romania and Kazakhstan and your role in the support and consolidation of the energy security in the region?
KMG fully owns (100%) the shares of KMG International N.V. (KMGI), acquired as part of the implementation of the long-term strategy of the Government of the Republic of Kazakhstan, aimed at expanding the presence on European markets.
KMGI is an important Group, with a complex multi-level structure, which operates in business lines such as trade and logistics, crude oil processing and petrochemicals (Petromidia and Vega Refineries, the petrochemical complex), downstream/retail through fuel stations, but also industrial services. Overall, there are 24 companies operating in countries such as Romania, Switzerland, Bulgaria, Georgia, Moldova, and Turkey (excluding 49% of the Rompetrol-France company). Since the acquisition of the Rompetrol Group, KMGI has been active on the European market, processing and trading petroleum products based on oil from Kazakhstan.
KMGI's processing capacities represent 46.3% of Romania's total capacity (5.9 million tons per year).
Note: Petromidia Refinery:
• Processing capacity – 5 million tons per year;
• Nelson complexity index – 10.5;
• Processing depth – 92.7%;
• Yield of light petroleum products – 86.2%;
• Production of products: Gasoline, diesel – according to the European Euro 5 standard, Jet A1 aviation fuel, LPG, propylene, raw materials for bitumen, coke, sulphur.
Oil from Kazakhstan represents approximately 37% of the consumption of all refineries in Romania.
KMGI is the third largest taxpayer in Romania - USD 25.9 billion in the last 16 years and is also one of the largest employers in Romania, directly providing 3,600 jobs.
The total value of KMG's direct investments in Romanian assets exceeded USD 2.5 billion (excluding the purchase price of the assets).
In Romania, KMGI operates a network of over 1,413 fuel sales points.
What are the key investment directions for Kazakhstan in Romania and in the region?
One of the strategic directions of activity of KMGI is the development of vertical integration, by increasing the number of fuel stations in the countries where it operates. KMGI is currently running a project to expand the current network of fuel stations in Romania to increase KMGI's profitability.
Thus, despite the complicated geopolitical situation in Europe, KMG continues to be one of the key players on the Romanian market and annually provides up to 4 million tons of raw materials for the Petromidia Refinery.
Future prospects for business development in Europe will depend on the investment climate. Particularly, we are concerned about the recent fiscal measures implemented by the Government of Romania and the fiscal pressure exerted on businesses, in the form of an additional tax on surplus profit and a future turnover tax.
What is the medium- and long-term investment plan and decarbonization strategy of KMG International?
Taking into account the changes in the environmental regulatory requirements of the European Union, KMGI's strategy stands for the development and implementation of decarbonization and petrochemical projects.
According to our estimates, by 2030, the cost of purchasing carbon certificates for KMGI could reach 70 million euros annually, and the cost of purchasing biocomponents will reach 329 million USD/year.
Under these conditions, it will undoubtedly be necessary to implement projects to reduce the carbon footprint and comply with more demanding environmental requirements. In the medium term, the portfolio of projects for the decarbonization of KMGI production is estimated at around USD 600 million.