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Ministry of Energy carrying out large-scale work to reorient oil and gas sector to production of export products 

Wednesday, 02 September 2020, 14:22:59

At the government session chaired by Prime Minister Askar Mamin, measures were considered to implement the Address of the President Kassym-Jomart Tokayev ‘’Kazakhstan in a New Reality: Time for Action.” Minister of Energy Nurlan Nogayev reported on current and medium-term plans in the energy sector.

The oil and gas sector has become the main driving force behind the country's economy, producing about 25% of the country's gross domestic product and attracting about 50% of investment in the economy. The ministry is carrying out large-scale work to reorient the oil and gas sector to the production of export-oriented products with high added value and the development of the high-value added petrochemical industry.

In connection with the launch of new enterprises and an increase in the production volume of the existing plants for the production of aromatic hydrocarbons, oils and polypropylene, an increase in the production of petrochemical products is observed annually. Today, the industry is implementing projects totaling about $15 billion until 2025.

According to the minister, the government provides support to attract investment in the development of the oil and gas chemical industry.

The creation of a single platform for the development of petrochemical production in a special zone will significantly save costs for the construction of infrastructure, supply of raw materials, transport costs, which will significantly improve the economic attractiveness of the projects being implemented.

“If we talk about large projects, today a gas chemical complex for the production of polypropylene with a capacity of 500 thousand tons per year and a cost of $2.6 billion is under construction. The project will be completed by the end of 2021,” the head of the ministry informed.

Today, the ministry is actively working to attract anchor investors for the implementation of the polyethylene production project.

In pursuance of the president's instructions to streamline exchange trading in the field of oil products and electricity, as well as to further develop competition, the following measures are proposed: 

  • development of requirements for electronic trading platforms and a commodity exchange for the implementation of the phased sale of commodity products through a special commodity exchange; 
  • adoption of legislative acts obliging energy producing organizations to implement electricity through a centralized trading platform in order to develop competition in the electricity market;
  • creation of a unified digital platform connecting consumers with service providers;
  • development of a “one window” principle for connecting business entities to the power supply system, which will simplify the procedures for connecting to power grids.

The average annual amount of obligations of subsoil users for research and development work is about 9 billion tenge.

Ministry of Energy of the Republic of Kazakhstan proposes the following to centralize the collection of funds from subsoil users and open distribution of funds for research and development work: 

  • creation of a National Scientific Council in the field of hydrocarbons and Uranium;
  • optimization and automation of all funding cycles for research and development work of subsoil users based on the information system of the Ministry of Education and Science.

According to Nogayev, the introduction of an information system for accounting for oil and gas condensate will automate the accounting of oil production, processing and transportation, as well as automate monitoring of the fulfillment of contract conditions.

“The Ministry of Energy, in order to further form cooperation in the field of industry and information technology, is working to create direct investments for the development of local content, created jointly with foreign investors, as well as the adoption of regulatory legal acts that exempt subsoil users from taxes and costs for digitalization in the amount of 1% of total costs,” the minister said.

At the same time, within the framework of the concept of development of the green economy by 2050, 50% of the consumed energy should be covered by alternative energy, including renewable energy sources. To stimulate the development of clean energy sources, it is planned to adopt a new law to support alternative energy.

“The volume of purchases of goods, works and services in the oil and gas industry in 2019 amounted to about 7 trillion tenge. The total local content in large projects was about 39%. At the same time, the share of locally produced goods was about 10%. The work of the Ministry of Energy will be aimed at increasing the share of local content in large oil and gas projects such as Tengiz, Kashagan and Karachaganak,” Nogayev explained.

The ministry is currently implementing two initiatives to increase the share of local content in the oil and gas sector. They are planned to be implemented in the near future. This is the creation of a local content fund and the International Center for the Development of Oil and Gas Engineering and Service.

“The purpose of this center is to localize the production of goods / services for the oil and gas industry of the Republic of Kazakhstan by opening new industries and service centers, as well as expanding the capabilities of existing domestic producers. This center will allow to eliminate the gaps of local producers / service companies in the production and supply of goods / services for the needs of operators” summed up Nogayev.

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