How much oil does Kazakhstan produce and who are the main buyers?

The Ministry of Energy reported a decrease in oil production in the country. The reasons are emergency power outages and scheduled maintenance work at the fields. However, this reduction in production could be beneficial to the country that has pledged to voluntarily reduce oil production by 78 thousand barrels per day until the end of 2024 under the OPEC+ agreement.

According to the Kazakh Bureau of National Statistics oil and condensate production increased by 5.7% compared to last year to 45.5 million tons (crude oil – 39.2 million tons, condensate – 6, 2 million tons) in the first half of the year. Oil production increased by 6.8%, condensate production decreased by 0.7%. Apparently, there are the problems with the processing of Karachaganak gas at the Orenburg Gas Processing Plant. The fact that Karachaganak Petroleum Operating (KPO) has reduced production is indirectly confirmed by the statistics on production in the West Kazakhstan region that demonstrated negative dynamics for the first six months (see Table #1 below).

Natural gas production increased by 1.2% to 28.9 billion cubic meters, but the production of commercial gas decreased by 4.7% to almost 5 billion cubic meters in the first half of the year (see table #2 below). This fact, perhaps, also demonstrates a decrease in the performance of KPO which is the largest supplier of commercial gas in the country.

KMG which has a stake in three large fields stated that in the first quarter production at Tengiz increased by 0.8%, at Kashagan by 105.5% and at Karachaganak, decreased by 1.3%.

July Trouble

The accident at the Mangistau Nuclear Power Plant (MAEK) which occurred on July 3 seriously affected the level of oil production in the country. According to Reuters a widespread power outage in the region dropped production by about one-fifth in early July. After the accident the Caspian Pipeline Consortium shut down three pumping stations in western Kazakhstan but continued pumping oil from Tengiz. At the same time the agency reports that Kazakhstan is expected to provide 1.57 million barrels per day of projected global oil demand in 2023.

Due to the accident the power supply to Kashagan and Tengiz was interrupted. The operators of these fields have their own Gas Power Stations, but they also take electricity from the general line. NCOC had to shut down the Bolashak oil and gas treatment plant and it was relaunched the same day. At the same time, starting from July 4 the operator began to supply electricity to the regional grid at the request of local authorities. But Tengizchevroil stated that the company’s activities were not interrupted due to a power outage and production facilities at Tengiz were operating as normal.

KMG reported that oil production was partially or completely stopped at the fields Ozenmunaigas, Mangistaumunaigas, Karazhanbasmunai and Embamunaigas companies due to the accident at MAEK. In addition, the national company noted that over the past 2.5 years the total shortage of oil amounted to 279 thousand tons due to power outages across all KMG assets. This year there were 153 such cases as a result 75 thousand tons of oil and gas were not produced.

The incident at MAEK affected the activities of companies operating in the Atyrau and Mangistau regions. These two regions produce about 75% of oil in the country (see Table #1 below). Not surprisingly, even shutting down production for a few hours led to such a sharp reduction in overall production that Reuters refers to.

It is expected that two large fields will stop for scheduled repairs by the end of the year: in August – Tengiz and in October – Karachaganak. This should allow Kazakhstan to fulfill its obligations to reduce production.

Customers are waiting

Changes in indicators of oil production in the country are immediately reflected in the supply on the world market. The International Energy Agency (IEA) in July report noted the recovery of production in Kazakhstan in June to the level of 1.6 million barrels per day.

In the past month Brent futures traded on average at $75 per barrel on the London Stock Exchange. However, the IEA believes that prices will go up when the reduction in oil production by 1 million barrels per day in Saudi Arabia will come into force. The kingdom’s crude oil production should fall to a two-year minimum (about 9 million barrels per day in July and August).

Global demand for oil is under pressure from a difficult economic environment, not least, due to the sharp tightening of monetary policy in many developed and developing countries over the past twelve months. Hopes for a sharp increase in demand in China also did not materialize and the long-awaited reopening of one of the biggest markets has not gone beyond travel and services, the recovery of economy has slowed down after a rise at the beginning of the year.

Although 70% of the total demand growth will still come from China this year and global demand for oil in 2023 will grow by 2.2 million barrels (to the highest 102.1 million barrels per day). Agency believes that the world oil production will increase by 1.6 million barrels per day (101.5 million barrels per day) due to the production in non-OPEC+ countries.

Meanwhile, this year oil prices have been lower comparing to last year and this does not satisfy exporting countries. Therefore, we can expect a further reduction in production and supplies.

In January-May of this year Kazakhstan exported more than 28.7 million tons of oil and earned over $17.2 billion. In physical terms the indicators decreased by 5%, in value terms – by 14%.

The main buyers of Kazakh oil are Italy, the Netherlands, South Korea, China and France. A significant increase in supplies to Romania, France, South Korea and Italy (see Table #3).

Table#1. Oil and condensate production in Kazakhstan*, January-June 2022-2023 thousand tons

Regions6М 20226М 2023Change, %
Atyrau24 086,426 647,9+10,6
Mangistau8 206,98 322,2+1,4
Western-Kazakhstani region6 232,36 204,6-0,4
Aktobe2 502,32 377,9-5
Kyzylorda1 985,21 910,5-3,8

*Data in main oil-producing regions

Table #2 Natural gas production in Kazakhstan*, January-June 2022-2023 million cubic meters

Regions5М 20225М 2023Change, %
Atyrau13 184,413 220,6+0,3
Mangistau1 450,41 354,4-6,6
Western-Kazakhstani region10 711,211 229,3+4,8
Aktobe2 734,42 647,6-3,2

*Data in main oil-producing regions

Table #3

Top 10 customers of oil from Kazakhstan, January-May 2023

CountryQuantity, mln.tonsValue, mln $Change in quantityChange in cost
Italy106 092+20%+10%
The Netherlands2,91 612-11%-25%
South Korea2,91 945+18%+16
China21 318-8%-6%
France1,91 191+30%+21%
Romania1,81 025+42%+29%