1. New Gas Supply Infrastructure in Kazakhstan and Central Asia
4/21/2017 8:59 PM
New Gas Supply Infrastructure in Kazakhstan and Central Asia
Andrew Neff
IHS, Senior Energy Analyst
20th Anniversary
Kazakhstan International Oil & Gas Conference
4-5 October 2012

2. Kazakhstan Gas: Main Points
Kazakhstan is surrounded by other gas producers with larger gas reserves, more gas production
Hence, finding outlets for Kazakhstan to monetise its own gas output is more difficult…or is it?
Investments in gasification are geared to supply domestic energy needs, develop system for potential future exports
What markets are there for Kazakhstan’s gas production?
Kazakhstan is better positioned than Uzbekistan and Turkmenistan to supply gas to Russia…and eventually (maybe) to Europe
Direction of Central Asian gas transit via Kazakhstan is changing
Trans-Caspian Pipeline: premature, but not out of the question

3. Central Asia: Gas Production and Exports Compared
Source: IHS CERA

4. Existing and Proposed Gas Infrastructure
Source: Intergas Central Asia

5. Kazakhstan’s Gas ‘Role’ in Central Asia…So Far
Primary role as transit state for other exporters
~80% of transportation volumes are international transit (~10% exports, ~10% domestic market)
Transportation volumes still not recovered to pre-crisis level
Impact of Gazprom dispute with Turkmenistan felt in continued lower transit volumes via Kazakhstan
Reduced utilisation rates on
Central Asia-Centre and
Bukhara-Urals pipelines (~40%)
Gazprom gas purchases from
Central Asia (2011):
11.2 bcm (Turkmenistan)
7.95 bcm (Uzbekistan)
Source: KazTransGas

6. IGA Gas Transportation Revenue Breakdown* (2011)
Source: Intergas Central Asia; * figures in USD

7. Domestic Supply Focus
Economic growth = increasing internal demand for gas
Domestic demand, gas exports constrained by lack of infrastructure
Gross output nearly twice commercial gas production
Re-injected to support oil production
What else to do with it??
Government support for gas sector
Law on Gas and Gas Supply (Jan. ‘12)
Mandatory utilisation of associated gas
Strategic investments in gasification
KazTransGas as national
gas operator (July ‘12)

8. Laying the Ground for Future Exports
Gasification projects galore to supply domestic consumers
Expansion and/or modernisation of pipelines to supply Almaty, Almaty province, city of Kyzylorda, South Kazakhstan province, Zhambyl province, Mangystau province
Two strategic gas pipeline projects of national importance
Beyneu-Bozoi-Shymkent pipeline (1,475km; estimated USD3.6 billion)
Goals: energy independence from Uzbekistan, tie-in to Central Asia-China pipeline
Phase 1: Bozoi to Shymkent/Akbulak (1,164km; construction launched Sept. 2011, due to be completed 2013)
Stage 2: Beyneu to Bozoi (311km; due to start 2014, end 2015)
Kazakhstan-China Main Gas Pipeline (1,304km; estimated USD7.3 billion)
Goals: gas transit from Turkmenistan, Uzbekistan, future exports (5 bcm/y) from Kazakhstan
July 2011: construction launched on Line C (25 bcm/y)

9. Turkmenistan’s Gas Export Options

10. Turkmenistan’s Motivation For TAPI
Turkmenistan has strong incentive to pursue TAPI pipeline construction
TAPI as key economic driver
Soviet-style economy relies heavily on gas export
revenues (estimated at over 50% of GDP)
Long-term gas production and export targets
require additional export capacity
230 bcm/y of gas output, bcm/y in exports (2030)
TAPI as necessary for diversification
Traditional dependence on Gazprom has highlighted Turkmenistan’s vulnerability
Price disputes in 1997 and 2009 led to supply stoppages, dealt heavy blows to
Turkmenistan’s economy
April 2009 explosion on CAC pipeline cut exports to virtually zero; January 2010 resumption
of supplies, but at a fraction of previous level (10-12 bcm/y rather than bcm/y)
Risk of new over-reliance on China?
Central Asia-China pipeline shifting Turkmenistan’s dependence on Russia to China instead
Source: IHS Global Insight

11. Turkmenistan-Afghanistan-Pakistan-India Pipeline

12. State of Play in the Long-Running TAPI Project
TAPI proposal continuing to move forward, despite security concerns
Alignment of political goals and economic needs among four participating countries
Significant progress post-2009
Four-party framework agreement (2010)
Uniform transit tariff agreed (2012)
Formal gas supply and purchase agreement (2012)
Pakistan: 38 mmcm/d
India: 38 mmcm/d
Turkmenistan-Afghanistan MoU on gas sector cooperation
Next steps: now the REALLY difficult part starts
Attempts to attract financing (international roadshows)
Formation of consortium to design, build, and operate TAPI
Desire, government political support insufficient to bring TAPI to reality
Security risks can be mitigated, but TAPI needs a commercial champion
TAPI At A Glance
Length
1,735km*
Throughput Capacity
33 bcm/year
Estimated Cost
USD10-15 billion
*including 145km in Turkmenistan, 735km in Afghanistan, 800km in Pakistan, and 55km in India

13. Uzbekistan Caught in the Middle
Geography and history leaves Uzbekistan few options for its gas
Turkmen gas supplies supplanted Uzbek volumes in CAC flows in Soviet era
Doubly landlocked = no sea access = no LNG export possibilities
China, Russia, India, Iran: all markets with closer suppliers
Vast majority of Uzbekistan’s gas production absorbed internally
Government determined to monetise its gas reserve wealth
Export focus as LUKoil-led projects boosting Uzbekistan’s gas output
Start of Uzbek gas exports via Central Asia-China pipeline (April 2012)
Billion-dollar investments to add value to gas production, find new outlets
Gas-chemical projects with foreign investors: Surgil (Uzbek-South Korean consortium), Mubarek (UzIndorama joint venture), Oltin Yo'l GTL (Sasol, Petronas, Uzbekneftegaz)
CNG retail fuel network expansion to supply vehicle market

14. TCP: Dead, or Just Premature?
Neither Azerbaijan nor Turkmenistan is ready to strike a deal that would pave the way to construct Trans-Caspian gas pipeline (TCP)
External political support/pressure notwithstanding
Azerbaijan focusing on securing routes for its own gas exports
Not ready to transit Turkmen gas when it hasn’t sorted a final plan to monetise its own gas resources
Turkmenistan lacks capacity to supply sufficient gas volumes to make TCP economically worthwhile
Gas from Block 1 insufficient to offset potential further loss of gas exports to Russia
East-West gas pipeline across Turkmenistan still under construction
Kazakhstan taking the “wait and see” approach
Resolution of maritime border dispute could open the door for Kazakh gas supplies

15. Key Questions
Karachaganak dispute resolved, but what future for phase-3 gas?
Russia, yes, but what about China?
What about Tengiz, Kashagan gas eventually?
Kazakhstan is better positioned to replace Uzbek and Turkmen gas volumes sent via CAC to Russia
Loss of Central Asia transit volumes offset by increased exports of Kazakhstan’s own gas
TCP prospects will get a boost with development of ‘southern corridor’
Will Central Asian gas transit (to China) offset decline in revenues from reduction in gas transit via CAC (to Russia)?
Turkmen, Uzbek gas volumes transiting Kazakhstan in new direction
Kazakhstan’s own gas production, exports will make the difference

16. One Possible Outlook for 2025
2008
2011
2025*
Gas exports to Russia
from Turkmenistan 38 10
from Kazakhstan 14 15 20
from Uzbekistan
TOTAL 62 35 30
Gas exports to China 45 65
Kaz participation in trans-Caspian --resolution of Az_Turkmen deal (use info from Caspian Gas internal presentation) --need infrastructure in place (Kaz as wait and see, rather than leader) --flow into Turkmen gas section
Source: IHS CERA; * indicative projection. All figures in billion cubic meters (Bcm).

17. 7/5, Bolshaya Dmitrovka Street
Questions?
Andrew Neff
Senior Energy Analyst
IHS Energy
7/5, Bolshaya Dmitrovka Street
Bldg. 2, 5th Floor
Moscow, Russia