Kazakhstan is a big, distant, and sparsely populated part that maps as a land span associating Europe and Asia. The oil and gas sector is the driving engine of the state ‘s economic system and the authorities is cognizant of the demand to better policies and reforms that support sustainable development. Kazakhstan is bestowed with important oil and gas resources and is expected to go one of the universe ‘s top 10 oil manufacturers within the following decennary ( Kaiser et al.,2007 ) . Kazakhstan is a landlocked state situated between Russia and China, neighbouring Turkmenistan, Uzbekistan and Kyrgyzstan. Virtually, four times the size of Texas, Kazakhstan has a significant oil and gas militias and plentiful mineral resources. As of the beginning of 2008, there were more than 200 oil and gas Fieldss registered in Kazakhstan. Though, the most important of its bing and prospective Fieldss are Tengiz, Kashagan and Karachaganak.
Proven oil and gas militias are presently 39.8 billion barrels ( Bbbl ) of oil and 64.4 trillion three-dimensional pess ( Tcf ) of natural gas-roughly 3.0 per centum and 1.0 per centum of the universe ‘s entire proven militias ( BP Statistical Review of World Energy, June 2010 ) . Kazakhstan presently ranks as the 11th state by its oil and gas militias. Oil modesty sums are comparable to Nigeria and Libya, and no other state in Europe or Eurasia, except Russia, has more gas militias.
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Kazakhstan is indispensable to universe energy markets because it has important oil and natural gas militias. With sufficient export chances, Kazakhstan could go one of the universe ‘s largest oil manufacturers and exporters. The chances of the Economy of Kazakhstan is straight linked with farther integrating into international economic dealingss, development of alone militias of energy and mineral resources, huge potencies to export industrial and agricultural merchandises, optimal employment of state ‘s transit potency.
Since 2000, Kazakhstan has undergone important economic growing. Two of the chief stimulation for this growing have been economic alteration and foreign investing, much of which has been concentrated in the energy sector. Exports and production of petroleum oil have grown drastically and Kazakhstan accomplished to be the 2nd largest oil manufacturer after Russia, among the former Soviet democracies. Kazakhstan possesses the Caspian part ‘s largest recoverable petroleum oil militias. Harmonizing to the BP statistical reappraisal its combined onshore and offshore proven militias were 5.5 billion metric tons ( 40 billion barrels ) as at 31 December 2008.
Kazakhstan ‘s oil production amounted to 1.4 million barrels per twenty-four hours ( bbl/d ) in 2008, more than double the degree of a decennary before, while domestic oil ingestion persisted low at 239,000 bbl/d. ( Beginning: U.S. Energy information disposal ) .
The crude oil industry in Kazakhstan maintains an of import map in the public assistance of the economic system and continues to develop quickly. The oil sector presently accounts for about 22 per centum of gross domestic merchandise ( Figure 1 ) . Based on the World Factbook 2010, 60 per centum entire one-year export grosss comes from exporting the oil and oil merchandises. Harmonizing to the GDP prognosis made by the authorities of Kazakhstan, mean one-year growing in 2009-11 will be 2.6 % . The oil and gas industry, whose portion in entire GDP increased from 10.9 % in 2001 to 21.8 % in 2008, plays a critical function in the Kazakhstan ‘s GDP construction ( Ernst & A ; Young, 2009 ) .
Persistent development of the oil and gas industry would non be accomplishable without foreign direct investing ( FDI ) . The one-year volume of FDI has been increasing bit by bit since 1998, but investings in the oil and gas industry have diminished. However, its portion in entire volume of FDI remains high. As of 2008, foreign direct investing has amounted to about $ 21 billion, of which 13 per centum was invested in the oil and gas sector ( Agency on Statistics of Kazakhstan ) .
Figure 1. GDP of Kazakhstan 2001-2008
Beginning: Agency on Statisticss of Kazakhstan
Figure 2. FDI in Kazakhstan 1998-2008
Beginning: National Bank of Kazakhstan
The state is greatly dependent on oil export grosss. Entire production in 2008 amounted to 70.6 million dozenss, of which 62.8 million dozenss were exported. The authorities expects entire production to lift to 80A million dozenss by 2010 and 130 million dozenss by 2015. By 2017, Kazakhstan taking to fall in the top 10 oil and gas exporters. These programs will non be existent without the start of marketable oil production at the Kashagan field. Its find in 2000 is considered to be the largest in the last 30 old ages. This is expected to be the universe ‘s largest oil field outside of the Middle East. Since it was discovered, involvement in the potency of Kazakhstan ‘s sector of the Caspian has greatly enhanced. State engagement in the oil and gas industry has accelerated over the last several old ages due to the important function of this sector in the economic system of the democracy.
The monolithic offshore Kashagan field is anticipated to go functional in 2012 or 2013. Besides leting investors to recover their development costs, Kazakhstan stands to gain financially. Harmonizing to Visor Capital ‘s caput of research it might likely be the start of a 10- to 15-year “ Aureate Age ” for Kazakhstan.
National Oil Company – KazMunaiGas
KazMunaiGas was formed in February 2002 by the brotherhood of KazakhOil and Transport Nefti Gaza to guarantee a individual province policy in the states mineral resources and to vie with international companies on E & A ; P contracts ( Ernst and Young, 2005 ) . KMG soon plays a ubiquitous function in the oil/gas sector, as investor and spouse on legion joint ventures ; monopoly operator of the domestic oil and gas grapevine web ( except CPC ) ; and in a regulative and administrative function. From the clip when KMG took control of the authorities ‘s involvement in the oil and gas sector, oil companies have been capable to extra supervising, with foreign investors normally being held to higher criterions of liability. In 2004, the authorities introduced statute law further spread outing KMG ‘s partaking in new ventures. KMG now has the right to take portion in all oil/gas undertakings, either on its ain or jointly with companies or on the side of the authorities. KMG ‘s intensifying power is prone to make extra opposition among investors. The creative activity of an independent regulative construction to administrate the industry remains an arguable and ignored issue.
KMG has been given the right to first stamp on all new blocks with minimal 50 per centum ownership. Improvement of oil/gas Fieldss without the full use of gas is now prohibited. Disciplinary actions for misdemeanor include contract delay, expiration, mulcts, and legal duty. In anterior contractual understandings, cost recovery bounds were negotiated on an single footing, whereas under new contracts, cost recovery can non transcend 75 percent gross production before reimbursement ; 50 per centum gross production after payback.
The Role of National Fund of Kazakhstan
The Kazakhstan National Fund ( NF ) was created in 2001 to help in cut downing the impact of volatile market monetary values on the economic system and to smooth the distribution of oil wealth over coevalss ( Tsalik and Ebel, 2003 ) . Its founding paperss depict its mission as ”stabilizing the socio-economic development of the state, roll uping nest eggs for future coevalss, and cut downing the state ‘s exposure to external factors ” ( Kazakhstan National Fund ) . The NF has both nest eggs and stabilisation aims. The nest eggs aims are intended to keep stable income across coevalss in expectancy of decreased oil production in the hereafter. The stabilisation aim is to stabilise the gross from oil production, counterbalancing bad old ages with the nest eggs from good old ages. The NF is an off-budget fund with all assets invested abroad in two portfolios – a nest eggs portfolio that comprises 75 per centum of the assets and a stabilisation portfolio that comprises the staying 25 per centum. The support regulations have been simplii¬?ed since the plan was created, and as of June 2005, about $ 5.2 billion have accumulated in the fund.