Will Kazakhstan become regional leader in gas production? And what is the role of QazaqGaz?

Kazakhstan can and will become a regional leader in the gas industry. A gas boom is expected in the country according to the chairman of the national company QazaqGaz Sanzhar Zharkeshov.

Kazakhstan does indeed possess large reserves of natural gas but declaring leadership in the region (in the presence of Russia and Turkmenistan which occupy first and fifth places in the world ranking for gas reserves) is perhaps a little reckless. Kazakhstan can significantly increase available raw and processed commercial gas resources, but it is necessary to invest in the exploration of gas fields, in the construction of gas processing plants (GPPs) as well as adopt a few legislative amendments to make investments profitable.

Question of price

Zharkeshov says that Kazakhstan is now in 15th place in the world in terms of gas reserves: proved and recoverable – 4 trillion cubic meters, forecasted – 62 trillion cubic meters.

“If we can convert these 62 trillion cubic meters in proven intelligence data, we will easily enter the top 10 countries. Yes, we have a lot of associated gas, and we know it. There are also potential fields that require additional exploration. In this regard, Kazakhstan can and will become a regional leader in the gas industry” says the chairman of QazaqGaz.

According to OPECб the top 5 countries in terms of proven gas reserves include Russia – 48 trillion cubic meters, Iran – 34 trillion, Qatar – 24 trillion, USA – 16.4 trillion and Turkmenistan – 14 trillion. In total, at the end of 2022, the volume of proven gas reserves in the world exceeded 210 trillion cubic meters.

Last year, Zharkeshov predicted that in 2023 there would be a gas shortage in Kazakhstan and called on the authorities to limit the new industrial consumers as well as to increase gas tariffs on the domestic market. He believed that last year, due to a lack of resources and rising consumption, gas exports would fall to 2 billion cubic meters. But sales abroad decreased to 4.6 billion cubic meters or by 36% compared to the previous year.

What has changed in a year? During this time, a new formula for determining the price of gas purchases from subsoil users was introduced in Kazakhstan. QazaqGaz, as a national gas operator has a priority right to purchase gas from operators. It almost completely owns the internal gas distribution network, export, and main gas pipelines. The price for the purchase of commercial gas from subsoil users was set by the government according to the formula: production cost + preparation costs + transportation costs to the point of sale to the national operator + profitability level of 10%. But operators consider this model to be insufficiently profitable to invest in the production and processing of associated gas. The authorities decided to meet their demand. Now the price will consist of 70% of the cost of export gas at the border of Kazakhstan and China and 30% of the maximum wholesale prices on the domestic market.

The Ministry of Energy expects that after the adoption of the new formula, the average price of gas in the country will increase by 2.5 times from approximately $50 to $120 per 1 thousand cubic meters. This should attract investment in exploration and development of gas fields.

In May, QazaqGaz already signed offtake contracts for the purchase of additional volumes of gas with 30 companies including CNPC-Aktobemunai, Kazgermunai, Kazakhoil Aktobe and Zhaiykmunai. The companies promised to increase gas production.

From July 1, 2023, the maximum wholesale prices for commercial gas were increased by an average of 15% by the order of the Ministry of Energy and the Ministry noted that the average retail price for commercial gas in Kazakhstan for the population is 22 tenge per 1 cubic meter and they will grow by 2.7 tenge. The cost of gas will increase annually for five years. Depending on the region the size of the increase will vary. For example, in Almaty this year the maximum price for 1 thousand cubic meters excluding VAT increased to 25.1 thousand tenge. During 2023-2028 it will grow annually by 12-15 percent and in five years will increase to 42.7 thousand tenge per 1 thousand cubic meters. During this period the wholesale cost of gas for Almaty residents will increase by more than 70%. In the Atyrau region the cost of gas will increase by 18.5% – from 9.6 thousand tenge to 11.4 thousand tenge per 1 thousand cubic meters over the same period. A separate, higher tariff has been approved for industrial consumers purchasing raw gas to produce compressed and (or) liquefied natural gas.

In addition, authorities introduced two new categories of consumers – large commercial companies and miners. They will be supplied at market price linked to the prices of gas exports to China.


Last year, Kazakhstan adopted a Comprehensive Gas Industry Development Plan for 2022-2026. It defines the main approaches to the gradual reform of the industry until 2030. The document proposes several initiatives that should help increase commercial gas resources. It is proposed to increase the production of raw and commercial gas primarily through explored areas such as Kalamkas-Sea, the Prorvinskaya group of fields and Urikhtau.

Several promising fields where additional exploration needs to be carried out include Aktoty, Ortalyk, Kairan, Lebyazhiy, Yuzhnoye Pridorozhnoye, Rakushechnoye, S. Nurzhanov, Yuzhny Urikhtau, Kalamkas-susha, Khvalynskoye and Imashevskoye. Their geological reserves are estimated at 950 billion cubic meters.

The volume of commercial gas production is also planned to increase through processing of associated gas. According to data from the State Commission on Reserves, out of 3.9 trillion cubic meters of recoverable gas reserves, 2.6 trillion are associated gas.

Gradually, associated gas is becoming a valuable resource. The authorities even propose to install raw gas meters to remotely monitor gas production.

Every year, about 50-55% of the produced raw gas is processed, the rest is reinjected back into the reservoir. In 2022, for example, a total of 53.3 billion cubic meters produced and only 27.8 billion cubic meters of commercial gas produced. More than 75% of production comes from Karachaganak, Kashagan and Tengiz fields. It would be logical to increase processing by reducing reinjection. But, according to the forecast of the comprehensive plan, in 2030 only 42.1 billion cubic meters will be processed into commercial gas (48%) out of 87 billion cubic meters of gas produced. The rest will be used for the subsoil user’s own needs or injected back into the reservoir. The production of commercial gas will even decrease.

The government has high hopes for Kashagan where a gas processing plant with a capacity of 1 billion cubic meters is already being built. It is expected that the plant will grow to at least 6 billion cubic meters. But the authorities are not sure what concept for further development the investors will choose.

The comprehensive plan contains a list of possible preferences that can be applied to gas projects to ensure profitability of at least 12%. Gas production projects are proposed to be exempt from property tax, mineral extraction tax, value added tax, export duties and income taxes. Similar benefits are offered to gas processing projects, plus zero duty on imports of equipment and reagents and the ability to fully export by-products (liquefied petroleum gas and condensate).

Profitable business

It is still unclear how Kazakhstan will be able to enter the top ten countries with the highest proven gas reserves. The proposed fields for development do not have large reserves. Sanzhar Zharkeshov’s statements about a “gas boom” are rather a PR move aimed at attracting investors to the industry. Large investments in gas production and processing are critical. The reference to Shell and CNPC whose experience will help provide a larger volume of gas for the market could indicates agreements with them on cooperation.

Industry sources indicate that the NCOC consortium was dissatisfied with QazaqGaz’s negotiations with CNPC on new gas processing plants based on Kashagan gas without notifying the consortium. Also, the management of NCOC is clearly dissatisfied with the current situation regarding the construction of a gas processing plant with a capacity of 1 billion m3 in the Atyrau region.

After the publication of Petrocouncil on the implementation of the gas processing plant project in the Atyrau region https://t.me/Petro_council/6921, Samruk-Kazyna in internal compliance report pointed out reputational and other risks due to the untransparent of changing the founder of the current general contractor. Industry experts express doubts about the project’s implementation on time.

Earlier, it became known that QazaqGaz offered CNPC to take part in the construction of the next Kashagan gas processing plant with a capacity of 4 billion cubic meters per year. The Chinese company is also considering the possibility of conducting joint geological exploration at the Zhalibek field with expected reserves of 200 billion cubic meters. The surface boundaries of the field close to Zhanazhol field owned by CNPC Aktobemunaigas.

The adopted amendments to purchase prices, an increase in maximum wholesale gas prices and the adoption of separate tariffs for large industrial consumers and miners should finally help QazaqGaz make a profit from sales in the domestic market or at least not lose it. Export earnings can be used to build processing plants.

In 2022, according to the operator’s report, revenues from gas sales amounted to 824.6 billion tenge, exports to China profited 483 billion tenge. The company supplied 18.4 billion cubic meters to the domestic market and to external market 4.3 billion cubic meters which make the export business profitable. The cost of gas was 338.2 billion tenge and natural gas production was 277.6 million cubic meters.

QazaqGaz managed to have a net profit (386.6 billion tenge) by the end of the year. This was achieved through revenues from gas exports. Despite a reduction in export volumes of more than a third, revenue from sales abroad increased by 11%, mainly due to rising prices.