Kazakhstan and alternative energy
Kazakhstan, a vast country located between the Caspian Sea, Russia, and China, holds significant potential in the alternative energy sector alongside its traditional fossil fuel resources. Following its independence from the Soviet Union in 1991, Kazakhstan transformed into a key player in the global energy market, largely due to foreign investments aimed at developing its extensive oil and gas reserves. The country is rich in natural resources, with notable reserves of uranium, making it the largest producer of uranium globally as of 2022.
Despite a heavy reliance on fossil fuels, which accounted for 89% of its energy in 2022, Kazakhstan is gradually expanding its alternative energy portfolio, focusing on solar, wind, and hydroelectric power. The government has made strides in managing relationships with international oil companies (IOCs) and is actively pursuing strategies to reclaim control over its energy resources. In addition to its oil and gas sectors, Kazakhstan is also investing in nuclear energy, planning further development of its nuclear reactors to enhance energy production. As such, Kazakhstan is positioning itself as an alternative energy source, increasingly important in the context of global energy demands.
Subject Terms
Kazakhstan and alternative energy
Official Name: Republic of Kazakhstan.
Summary: After the collapse of the Soviet Union in 1991, Kazakhstan required foreign investment and technology to develop its oil and gas reserves. Kazakhstan also exports uranium and the country is becoming an important alternative source of energy to the Middle East and Russia.
Kazakhstan is a former Soviet country that spans the region between the Caspian Sea to the west, Russia to the north, and China to the southeast. The country is not only vast in land area but also rich in natural resources.
Prior to 1991, Kazakhstan was part of the Soviet Union and accounted for only 6 percent of the empire’s total oil production and 1 percent of its total gas production. After the collapse of the Soviet Union, Kazakhstan did not possess the technological or financial ability to explore and develop its immense oil and gas reserves independently. In order to do so, Kazakhstan required significant foreign investment and technological expertise from international oil and gas companies (IOCs). IOCs perceived Kazakhstan to be a key source of energy and, in that capacity, an alternative to Russia and the Middle East. Throughout the 1990s, IOCs signed contracts with the Kazakh government to develop and profit from the country’s resources. Since 1993, Kazakhstan’s extractive industries have attracted $30.7 billion in foreign investments, which constitutes 76 percent of the total foreign investment in the country.
Kazakhstan has experienced tremendous economic growth since it declared independence in 1991, but much of that growth has been resource-dependent. Natural case and coal were a significant part of the country's exports and gross domestical product in 2022. The country remained dependent on fossil fuels for energy (89 percent) with solar (1.4 percent), wind (1.5 percent), and hyroelectricity (8 percent) playing a smaller role.
In 2020, Kazakhstan produced an estimated 1.3 million barrels of oil per day, and the full development of the country’s oil fields could make it one of the world’s top five oil producers. Kazakhstan’s proven natural gas reserves in 2021 were estimated at 2.40 trillion cubic meters. By 2022 the country had shifted from being a net importer to a net exporter of gas. Moreover, Kazakhstan holds 12 percent of the world’s uranium reserves (2022) and therefore is a key actor in the future of nuclear energy. In 2022, Kazakhstan generated 26.033 million kilowatts of energy and consumed 108.34 billion kilowatts.
Major Oil and Gas Investments
The Kazakh government and the IOCs signed a number of contracts in the 1990s that were typically 40 years in duration. These contracts vary in the level of control the IOC has over the resource, as well as the compensation agreement between the company and the Kazakh government.
In 2002, the government established KazMunaiGaz, a national oil company, in order to enhance its role in the development of the country’s resources and represent its direct interest in oil and gas contracts. As of 2011, the majority of the oil contracts either were joint ventures with KazMunaiGaz or were production-sharing agreements (PSAs). In both types of contracts, the IOC bears the cost and risk of the exploration phase.
Some of the major IOCs to sign contracts include Chevron, the Italian state-owned company Eni, and the UK-based British Petroleum and the British Gas Group (BG). IOCs have targeted the three major oil and gas fields: the Tengiz field, the Karachaganak field, and the Kashagan field. Tengizchevroil, an operating company in which Chevron is the majority stakeholder, has developed the Tengiz field since 1993. The field is located on the Caspian Sea and is currently Kazakhstan’s largest oil-producing field.
The Karachaganak field is located in northwestern Kazakhstan and has reserves of around 8 billion to 9 billion barrels of oil and 47 trillion cubic feet of natural gas. BG Group and the Eni have the two largest stakes in Karachaganak Petroleum Operating, the field’s operating company. In 2024, the country announced that the national oil and gas company KazMunaiGas and Russia's Lukoil had jointly established the Kalamkas-Khazar Operating project in the Caspian Sea off the coast of Kazakhstan. Construction of the offshore platforms in the sea was expected to begin in 2026. The total reserves related to this project were estimated at 67 metric tons of oil and 9 billion cubic meters of natural gas.
Changing
As a result of the scale of foreign investment in energy resources, IOCs and the Kazakh government have become mutually dependent, although this relationship can be tense. Kazakhstan has come to rely on IOCs for a number of social services. The contracts require IOCs to spend approximately 1 percent of their capital expenditures—typically amounting to between $10 million and $20 million per year—on social projects. The money for social projects is used for building schools, hospitals, and water supply systems, as well as supporting community education programs. These programs have greatly assisted the Kazakh government to continue to provide citizens with social services previously provided by the Soviet system.
Kazakhstan signed agreements with IOCs at a time of financial distress and when significant foreign investment and technology were required to develop its resources. Managing relationships with IOCs has been a key feature of Kazakhstan’s energy policy, and it is likely to continue to be so in the future. Now that the energy sector has had more than a decade since independence to develop, the government has pursued a strategy of reclaiming control over its resources.
Coal and Nuclear Energy
In 2023, Kazakhstan ranked 10th in the world in coal production. The country produced 118.195 million metric tons of coal in 2023, consumed 84.85 million metric tons, and exported 37,309 million metric tons.
Kazakhstan has large reserves of uranium, and in 2022 was the largest uranium producer in the world. That year, the country produced 21,227 metric tons. Uranium exports represented an increasing strategic interest for the Kazakh government. Kazakhstan had three nuclear power reactors in 2024 and planned to construct more.
Bibliography
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