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DE RUEHTA #1187/01 1960456
ZNR UUUUU ZZH
O 150456Z JUL 09
FM AMEMBASSY ASTANA
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UNCLAS SECTION 01 OF 02 ASTANA 001187 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EPET EINV KZ
SUBJECT:  KAZAKHSTAN:  GAS PRODUCTION AND TRANSPORTATION UPDATE 
 
REF:  (A) ASTANA 0862 
 (B) ASTANA 0166 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Officials from the Ministry of Energy and 
Mineral Resources and national oil company KazMunaiGas recently 
briefed Energy Officer on the latest natural gas production 
forecasts and pipeline projects.  END SUMMARY. 
 
ABOUT 30 BCM PRODUCED IN 2008 
 
¶3.  (SBU) According to the Managing Director for Gas Industry 
Development at KazMunaiGas (KMG), Mussabek Issayev, Kazakhstan has 
3.3 trillion cubic meters of natural gas reserves and in 2008, 
produced 30 billion cubic meters (bcm) of gas.  Approximately 12 
bcm, or 40 percent of Kazakhstan's total production, was re-injected 
at the Karachaganak and Tengiz fields to maintain pressure for oil 
production.  An additional 2.5 bcm was flared for technical reasons, 
while 11 bcm from the Karachaganak, Tolkyn, and Tengiz fields was 
exported.  To meet domestic demand, Kazakhstan imports 1 bcm from 
Russia to supply its northern regions, and 3 bcm via swap operations 
with Uzbekistan to supply its southern regions. 
 
REINJECTION HINDERS GAS MARKET 
 
¶4.  (SBU) Issayev said he expects Kazakhstan to produce up to 100 
bcm of natural gas by 2020.  He anticipates that the Karachaganak, 
Tengiz, Zhanazhol, and Kashagan fields will be responsible for 92 
percent of all natural gas production.  Issayev also said he expects 
Tengizchevroil (TCO) to reinject 40 percent of Tengiz gas, 
Karachaganak Petroleum Operating B.V. (KPO) to reinject 40 percent 
of its gas, and the North Caspian Operating Company (NCOC) to 
reinject 80 percent of the gas produced at Kashagan.  "As a result," 
said Issayev, "only 35 bcm will be for sale, of which 15-18 bcm will 
be consumed domestically, and 15-17 bcm will be exported." 
According to Issayev, KMG is studying alternatives to gas 
re-injection to maintain field pressure.  "As the price of gas 
steadily increases, it is much more profitable to sell more gas and 
re-inject less," he said.  Issayev hypothesized that carbon dioxide, 
nitrogen, and water could be used instead of gas to maintain 
pressure in the wells for oil production. 
 
THE KAZTRANSGAS MONOPOLY 
 
¶5.  (SBU) As reported in reftel B, KMG subsidiary KazTransGas (KTG) 
owns and operates all of the gas pipelines in Kazakhstan.  KTG 
transports gas to export markets via subsidiaries such as Intergas 
Central Asia, which operates the Kazakhstani part of the Central 
Asia-Center gas pipeline, and Asian Gas Pipeline, a joint venture of 
KTG and the CNPC subsidiary that manages the Kazakhstan-China gas 
pipeline.  KTG transports gas to domestic markets via regional 
subsidiaries such as KazTransGas-Aimak.  Issayev told Energy Officer 
that "even though the Central Asia-Center gas pipeline was built 40 
years ago, it still safely transits 45 bcm of Turkmen gas, 10 bcm of 
Uzbek gas, and about 5 bcm of Kazakhstani gas a year." 
 
CASPIAN LITTORAL GAS PIPELINE 
 
¶6.  (SBU) On December 22, 2007, Kazakhstan, Russia, and Turkmenistan 
signed an agreement to build the 1,600-kilometer (km) Caspian 
Littoral (Prikaspiskiy) Gas Pipeline, with a 20-bcm designed annual 
throughput capacity.  Of the pipeline's 1,600 km length, only 10 km 
will be built by Russia, 795 km by Kazakhstan, and 795 km by 
Turkmenistan.  According to an April 9 statement by Gazprom CEO 
Alexei Miller, the capacity of the Caspian Littoral pipeline might 
be increased by another 20 bcm.  Kazakhstan will transit 10 bcm of 
Turkmen gas from Belek and export 10 bcm of its own gas via Beineu 
to Russia's Alexandrov Guy.  According to Timur Imashev, Director of 
Gas Industry Development at the Ministry of Energy and Mineral 
Resources (MEMR), Kazakhstan will fill the pipeline with gas from 
Karachaganak and Tengiz, in addition to new offshore fields such as 
the N Block, Pearls, and Kashagan, if needed.  He told Energy 
 
ASTANA 00001187  002 OF 002 
 
 
Officer on June 8 that the project is expected to be completed in 
¶2013. 
 
¶7.  (SBU) Imashev sees the Caspian Littoral pipeline as an extension 
and modernization of the existing Central Asia-Center gas pipeline 
and does not anticipate any technical difficulties with the project. 
 However, he said that ongoing negotiations between Turkmenistan and 
Russia over the price of Turkmen gas might delay the launch of the 
project.  Imashev expects that 30 bcm of gas will be supplied by 
Turkmenistan and up to 10 bcm by Kazakhstan.  "Kazakhstan does not 
really care whether Turkmenistan has gas, or how much they have," he 
said.  "We just want guarantees that they will pay the transit 
fee." 
 
KAZAKHSTAN-CHINA GAS PIPELINE 
 
¶8.  (SBU) A 1,300-km Kazakhstan-China gas pipeline with an annual 
capacity of 40 bcm will transit Turkmen gas to Uzbekistan's border 
with Kazakhstan, and then to the Chinese city of Khorgos.  MEMR's 
Imashev told Energy Officer that 13 bcm a year would be supplied 
from a Turkmen gas deposit currently being developed by CNPC on the 
right bank of the Amu Darya River, and 17 bcm would be purchased by 
China from Turkmenistan.  On July 10, Beimbet Shayakhmetov, Director 
General of the Asian Gas Pipeline company, announced that the first 
segment of the pipeline would be completed by November 2009. 
According to Shayakhmetov, the pipeline would only carry 
approximately 4.5 bcm a year, but it is expected to reach full 
capacity by late 2013.  Once the pipeline is at full capacity, 30 
bcm will be transported to China and 10 bcm will be used 
domestically.  The Kazakhstan-China gas pipeline will consist of two 
parallel pipelines, with a diameter of 1,067 millimeters and a 
length of 1,304.5 kilometers.  The main contractors of the project 
will be Kazakhstan's KazStroyService and China Petroleum Pipeline 
Engineering. 
 
BEINEU-BOZOI-AKBULAK 
 
¶9.  (SBU) The 1,510-km Beineu-Bozoi-Akbulak gas pipeline will 
connect the Central Asia-Center and Kazakhstan-China gas pipelines. 
KMG's Issayev told Energy Officer that the pipeline would not only 
help Kazakhstan secure gas for Kyzylorda, South Kazakhstan, Zhambyl, 
and Almaty oblasts, but also help the Chinese ship Kazakhstani gas 
from the CNPC-operated oil and gas fields in Aktobe and Mangistau 
oblasts.  The Bozoi-Akbulak segment of the pipeline has a 5 bcm 
annual throughput capacity and was officially opened on January 22. 
Completion of the Beineu-Bozoi segment would increase the pipeline's 
capacity to 10 bcm and is expected to be completed when the second 
stage of the Kazakhstan-China gas pipeline comes on stream. 
 
¶10.  (SBU) MEMR's Imashev said that the Beineu-Bozoi-Akbulak 
pipeline would reduce dependence of the western regions of 
Kazakhstan on Uzbek gas obtained via swap operations.  He complained 
that "Uzbekistan is problematic, as it often plays games."  Imashev 
explained that Kazakhstan does not have a direct contract with 
Uzbekistan which would give Kazakhstan leverage to impose fines for 
breaching terms.  "If we had a contract," he explained, "then 
Uzbekistan would increase the price from $80 to $300." 
 
HOAGLAND