US Discusses Kashagan, Tengiz Oilfield Prospects

Kazakhstan To Develop Kashagan Field

Washington pushes for KCTS pipeline, diversification of energy sources and supply routes.

ASTANA – The Principal Deputy Assistant Secretary of State for the Bureau of Energy Resources Mary Warlick has recently visited Astana to participate in the national meeting of the Board of the Extractive Industries Transparency Initiative (EITI) attended by all oil and gas companies operating in Kazakhstan.

She also met with the managers of the American companies, as well as with Kazakh government officials. As part of her visit agenda, she held a press conference for the journalists who were very interested in her opinion on major oil and gas projects, especially, Kashagan.

As has been reported earlier, the first export lot of Kashagan oil left the field three weeks ago. According to the Minister of Energy of Kazakhstan Kanat Bozumbaev, the government of the former Soviet republic expects to see production level reach 500,000 to one million tonnes of oil by the end of this year, and 4 million to 7 million tonnes of oil in the future.

Ms Warlick, in your opinion, at a time when oil prices are so low, and we have so much oil everywhere in the world, big reserves, how relevant are big and expensive oil and projects like Kashagan that we recently launched?

MW: It is very important in terms of longer-term global energy security that production continues in important oil and gas and other energy resource projects all around the world.

In fact, there is a real risk that if continuous investments are not made in new and existing projects that in the not too distant future as global energy market shift, they always do, that we could face a situation of supply shortages again that could be quite damaging for economies, and therefore, in order to ensure sort of predictability, and, as I mentioned, medium to long term energy security, it is very important that those investments in production in oil and gas and other kinds of energy resources continue to be made in a very deliberate way all around the world.

I would make two other points, however, I think, that current environment as difficult as it is for some economies around the world presents an opportunity for governments to begin to take some important reform steps to ensure greater efficiencies in the markets in the way resources are used, revenues are used from hydrocarbon production.

And that includes taking measures such as reforms with respect to fossil fuel subsidies, and, as I mentioned, sort of taking greater efficiency steps to ensure that stronger real market conditions prevail.

But the second point I want to make is that this is also really a very important moments for the countries around the world to think about how to begin to transition to cleaner energy alternatives and the renewables in other sectors in a way that’s going to make it possible for all countries around the world to meet our climate and emissions goals.

So for that reason I would say that even in a country like Kazakhstan, which is clearly very much blessed in terms of natural resources and, particularly, in the hydrocarbon area, we are very and very pleased and encouraged to see the investments that are beginning of be made in renewable sector in wind and solar energy, and I really very much think that focus at EXPO 2017 on energy future will present great opportunity for Kazakhstan itself and also for all the companies and countries who participate in EXPO to use this as a platform to demonstrate some of the emerging clean energy technologies that are really going to enable and facilitate that very important transition.

Did you meet with Chevron to discuss the situation at another major project, Tengiz?

MW: Yes, I have met with a number of American companies and it was very beneficial to get a better understanding of the state of play and their investments here. A renewed significant additional, I believe, of over 35 billion dollars, investment, being made in the Tengiz Chevron project for the future project growth is obviously very important, and so we are very pleased to see that are beginning to move forward.

And I also had an opportunity to discuss all of these projects, but Kashagan, as well, with Exxon, which is also an investor in the Tengiz project, but with government officials here, too.

After the launch of Kashagan, what do you think about the prospects of the KCTS (Kazakhstan Caspian Transportation System) pipeline that would go through Southern Caucasus and bypassing the territory of Russia? At the same time, the CPC (Caspian Pipeline Consortium) pipeline is completing its expansion project, and has already accepted the first Kashagan oil into its system.

MW: Obviously we are in general very supporting of companies’ decisions to move forward with pipelines that would provide additional routes for export that will bring oil and gas to global markets.

But we also understand that major projects like the pipeline you mentioned are very significant ones involving major investment and resource decisions on the part of companies, and so, at the end of the day, those are decisions for those involved in the consortium to make at the right time.

We would be very supportive of other countries’ ability to deliver hydrocarbons, as diversification, finding new ways to bring energy supplies more broadly into Europe and on to global markets is really very important in terms of broader global energy security.

So for that reason we’ll continue to be very strong supporters of projects that are able to contribute towards that goal.

How would you assess the implementation of the EITI principles in Kazakhstan?

MW: Kazakhstan was one of the first countries that actually began participating in the Extractive Industries Transparency Initiative or the EITI when it was first formed, and it became a compliant country after working hard something like 6 years in 2013. So we are really pleased with Kazakhstan’s leadership in this particular initiative recognizing just how important transparency is in the extractive industries is in creating good business environment that will lead to good and strong investment.

But I know this is a very important moment for Kazakhstan in so many different ways and also a very important time in terms of our bilateral relations, so I am really pleased to be here this year at a time when we are celebrating 25 years of US-Kazakhstan diplomatic relations.

And for Kazakhstan taking up its leadership in UN Security Council beginning next year is very important in terms of its global engagement and leadership. Next year is also an important year I know in terms of Kazakhstan hosting EXPO 2017, and I also understand that the Universidad games will be hosted in Almaty next year as well. So, obviously, it’s a very important moment in a couple of years in terms of Kazakhstan international engagement.

And course Kazakhstan plays such an important role in terms of energy security issues as well, and, as I think you know from my current role working on energy security issues at the state department it’s another reason why I am here on this particular visit.

US companies, as you know have been investing in Kazakhstan for many years now, in particular in the oil and gas sector, but not only, so are really very delighted to see those projects continuing to move forward and even more importantly than that, additional investment being made in some of those projects.

Projects such as TCO and the restart of the Kashagan project, as well as the important production coming out of Karachaganak make very important contributions to both regional and global energy security.

And I know the continued development of these resources is so important for Kazakhstan as well.

Citing a professor of California University Michael Ross who wrote “The Oil Curse”, any country that is importing oil but has a real high level of democracy can dictate other countries who might be really affluent in oil and gas resources but have no high democratic forces how to behave and what to do, and how to act. Do you agree with this view?

MW: I am not going to comment on the politics, but I think I can make just a couple of points.

Any country that is overly dependent on one particular resource for economic growth and revenues is not well positioned necessarily to deal with changes in the markets. I think we have seen this in the last couple of years with respect to the downturn of the markets when you look at a country like Venezuela, for example, or any number of economies which rest so heavily on revenues from oil and gas.

For that reason, it’s been very much a part of our message for many years with countries around the world that diversification of their economies is very much in their interests. And at the same time, looking at this issue from the perspective of energy importers, the issue of energy security is terribly important as well. It’s not good for a country to be overly dependent on one other country for its energy imports, because that also imposes a certain kind of dependency that makes it hard for countries to deal with disruptions in the markets or, perhaps, even politically motivated steps that can interrupt energy supplies.

By Kulpash Konyrova