Oil & gas

Gas supply to the domestic market

JSC “National Company “QazaqGaz” (hereinafter – QazaqGaz) manages the centralized infrastructure for the transportation of commercial gas through main gas pipelines and gas distribution networks, provides international transit and sells gas on domestic and foreign markets, develops, finances, builds and operates pipelines and gas storage facilities in 15 regions of operation.Founded in 2000 the company operates the largest network of trunk pipelines in the country with a total length of over 20.6 thousand km (including 2 793 km of branch pipelines) and gas distribution networks with a length of more than 59 thousand km.

Key performance results

QazaqGaz: milestones of history

On February 5, 2000 the resolution of the Government of the Republic of Kazakhstan on establishment of the KazTransGas Closed Joint Stock Company was signed. On June 9, 2004 KazTransGas Closed Joint Stock Company was renamed into KazTransGas Joint Stock Company.

On November 30, 2021, KazTransGas JSC was awarded the status of the National Company.

On December 31, 2021 KazTransGas was renamed to QazaqGaz.

The company operates along the entire chain: from geological exploration and production to the sale of final products.

QazaqGaz provides international transit and uninterrupted supply of gas to the domestic market, plans to introduce scientific developments, nurture young specialists and contribute to the energy security of Kazakhstan.

Over 23 years, the company has provided more than 2.3 million subscribers with blue fuel, who consume about 85 million m³ of gas daily during the heating season.

The company plans to achieve the level of gasification of the population of Kazakhstan up to 59% and increase the length of gas trunk pipelines and distribution networks up to 86 thousand km.

Today, the company operates the largest network of main gas pipelines in the country with a total length of more than 20.6 thousand km (of which 2 793 km are gas pipelines branches) and gas distribution networks with a length of more than 59 thousand km.

In mid-2022, a new division, QazaqGaz Exploration & Production was created in QazaqGaz JSC by transformation of Amangeldy Gas LLP. Thus, all new subsurface use projects are consolidated in one structure.

The company has received 10 new licenses for exploration and development of new fields.

In 2022, the QazaqGaz group of companies practically implemented all production plans.

The main gas transportation totalled 83 755 million m³, including:

• domestic transportation - 21 956 million m³;
• gas transportation for export – 9 275 million m³;
• international transit – 52 513 million m³;
• gas sales amounted to 22 751 million m³, including for export - 4 333 million m³.

New gas processing plant

In August 2022 GPC Investment LLP - the operator of the Kashagan gas processing plant project with a capacity of 1 billion m³ - was transferred to the trust management of QazaqGaz.

After completion of the transfer procedure, the QazaqGaz team quickly staffed and mobilized the project team, with the support of the Government of Kazakhstan, logistics of equipment supplies was established.

QazaqGaz initiated and conducted the comprehensive audit of the project with the involvement of international companies.

700 people were involved in the project, at the peak of construction, 2,100 people, 300 units of special machinery and 991 units of equipment will be involved. Once commissioned, the GPP will create 600 permanent jobs in the region.

The railway tracks of the first start up complex have already been brought in, which allows for timely delivery of materials and equipment.

In order to control the quality of the equipment manufacturing process, QazaqGaz JSC engaged a specialized international company, TUV Rheinland.

In 2022, the previously approved design and estimate documentation (DED) was adjusted. When adjusting the DED, all shortcomings in terms of reliability and safety of equipment were taken into account considering world experience for similar projects. Technological equipment and technological processes have been optimized with a focus on the quality of products, as well as reducing emissions into the atmosphere and energy consumption.

To strengthen project management and engineering support of the project, one of the world leaders in the field of engineering, Technip Energies was engaged.

QazaqGaz held public hearings in Makat district of Atyrau region. The meeting discussed the possible impact on the environment as part of the adjustment of the project for the construction of a gas processing plant at Kashagan. The hearing was attended by residents of the district, republican public environmental organizations and representatives of local executive bodies.

The Kashagan gas processing plant, which will process 1 billion m³ of crude gas and produce about 700 million m³ of commercial gas, is scheduled to be launched in 2025. The capacity of the second stage of the project will be 2-4 billion m³ of crude gas per year. The third and fourth projects should provide another 6 billion m³ of gas.

Gas Transmission System Modernization

To date, Kazakhstan-China and Beineu-Bozoi-Shymkent modern gas trunk pipelines have been built in Kazakhstan, through which gas exports and domestic gas supply are ensured.

These projects were implemented, among other things, at the expense of QazaqGaz. In addition, the entire technological infrastructure has been created, the possibilities of which are not only to increase capacity, but also to diversify gas flows in any direction.

QazaqGaz continues to implement investment projects on construction, modernization, reconstruction of gas transportation infrastructure and gasification of the regions. 

In 2022, the company began work on the implementation of priority projects in Mangystau and Atyrau regions. The project is being implemented to build a gas infrastructure for the conversion of the Almaty heat power plant to gas.

In 2022, the construction of the megaproject of the gas transportation system of Kazakhstan – the second line of the Beineu-Zhanaozen main gas pipeline was launched.

According to the technological scheme of the project, the total length of the 2nd line of the gas pipeline will be 308 km, with a capacity of 5.8 billion m³ per year.

Today Mangystau region has the highest consumption of natural gas in the domestic market of the country, so the construction of the second line is of great social economic importance, and will strengthen the energy security of the region.

The project implementation will ensure stable gas supply to the settlements of Mangystau region, large enterprises whose operation directly depends on reliable and uninterrupted gas transportation for power generation, heat supply to the population, social facilities and industrial enterprises of the region, as well as prevention of emergency situations and elimination of the risk of gas supply interruption as a strategically important service to the population of the region.

Also in 2022, the overhaul of the Zhanaozen-Zhetybai-Aktau gas transmission system was started, consisting of three threads and being a continuation of the Okarem-Beineu main gas pipeline, which covers the need for natural gas in Mangystau region, Aktau city and large industrial enterprises of the region such as Mangistau Nuclear Power Plant etc.

Resource base

According to the company, following 2022 gas consumption in Kazakhstan totalled 21 billion m³, with exports - 5 billion m³. According to the forecast, by 2030 the volume of gas consumption in the country will grow to 40 billion m³.

To date, recoverable gas reserves in Kazakhstan are estimated at 3.8 trillion m³. The main gas reserves are concentrated in four large fields: Karachaganak, Tengiz, Kashagan and Zhanazhol. Their total volume is 2.7 trillion m³.

Meanwhile, QazaqGaz’s own natural gas reserves in 2022 amounted to:

• at the Amangeldy deposit - 10.26 billion m³;
• at the Zharkum deposit - 0.343 billion m³;
• at the Airakty deposit - 2 485 billion m³;
• at the Anabai deposit - 2 226 billion m³.

In December 2022, QazaqGaz completed the procedure of acceptance and transfer of the Pridorozhnoye field, previously owned by Samruk-Energy JSC. It is known that the recoverable gas reserves on the Pridorozhnoye amount to about 10 billion m³.

The Pridorozhnoye field is located in Suzak district of Turkestan region. The field was discovered in 1975.

In 2023, the Minister of Energy of the Republic of Kazakhstan approved the roadmap for increasing the volume of commercial gas, which provides for an increase in the resource base of about 640 billion m³ of gas.

The Anabai field is planned to be commissioned in 2023. The forecasted production volume is 16 million m³ per year.

In 2026, Barkhannaya field will be launched with a forecasted production volume of 48 million m³.

In 2027, Pridorozhnoye field will be launched with a production of 142 million m³ per year.

Meanwhile, the deterioration of the gas transmission infrastructure hinders the development of the gas industry. The tariff for the supply of natural gas to Kazakhstan consumers, which does not permit the modernization of the gas infrastructure, results in losses.

To reduce losses by KZT18 billion, the company approved wholesale prices with 7.6% increase on average in Kazakhstan for the period from July 01, 2022 to June 30, 2023.

In April 2022, a pilot project was launched in Zhambyl and West Kazakhstan regions, where retail prices for commercial gas were reduced by 20%. Since July 2022, retail prices for commercial gas have been reduced by 20% throughout the republic.

By 2030, gasification is planned to cover 65% of Kazakhstan's – 13.5 million people. Industrial facilities are also switching to gas. According to the Ministry of Energy of the Republic of Kazakhstan, gas consumption in the country has increased by 35% over the past 5 years. Annual increase was 7% and will only grow in the future. This is facilitated by the commissioning of new industrial facilities and the implementation of large gas chemical projects.

A significant part of domestic gas consumption is directed to needs of the population, which is a priority energy policy of the Government of the Republic of Kazakhstan.

In Kazakhstan, the Committee on Regulation of Natural Monopolies of the Ministry of National Economy of the Republic of Kazakhstan regulates gas prices for end consumers depending on regions and categories of consumers.

QazaqGaz carries out wholesale sales of commercial gas at marginal wholesale prices approved annually by the Ministry of Energy of the Republic of Kazakhstan in coordination with the Ministry of National Economy of the Republic of Kazakhstan.

QazaqGaz IPO

The company plans to go public in 2025. However, before offering securities to a wide range of investors, it is necessary to increase the investment attractiveness of QazaqGaz. Anti-crisis measures are already being taken in all areas of the company’ business, and work is underway to optimize costs.

But the main agenda item remains the pricing of commodity gas. To date, its cost is underestimated, which is why producers are not interested in production.

This situation led to the shortage of this product in Kazakhstan, which could not but affect the activities of the national operator.

According to calculations of the company’s analysts, the national gas operator loses KZT11 from each “cube”. Over the past five years, the company has KZT587 billion of accumulated loss (from gas sales to the domestic market), and if nothing is changed, in three years the company’s loss may reach KZT1 trillion. 

In this regard, the company has developed and presented the new business plan. Now all the nuances are being worked out together with the Sole Shareholder - Samruk-Kazyna JSC.

QazaqGaz participates in the implementation of a comprehensive plan for the development of the country’s gas industry for 2022-2026. The company has already initiated a number of proposals to the law “On Gas and Gas Supply” on socially fair pricing reform, including expanding the list of categories of consumers willing to purchase marketable gas at market value.

Plans for 2023

On the run-up to the IPO, the company focused on achieving a higher position in the ESG rating, improving corporate governance, and reviewing environmental regulations.

Among the priorities of QazaqGaz – modernization of gas transmission infrastructure in Mangystau and Atyrau regions. The company intends to start developing a feasibility study on the project “Increasing the Capacity of Beineu-Bozoi-Shymkent Main Gas Pipeline”. Besides, it is planned to increase the volume of marketable gas, due to the commissioning of Anabai field into commercial development.

Negotiations are underway with the operator of the Kashagan field (NCOC) to reach an agreement on the management of the entire volume of liquefied petroleum gas.

From the extraction of raw materials – to a new processing stage Oil and Gas Chemistry Development

The idea of deep processing of the country’s gas resources to produce high value-added products was discussed at the dawn of Kazakhstan’s independence in 1993. From the very beginning of the development of the Tengiz field, all agreements with Tengizchevroil LLP included provisions on the supply of associated gas produced in the process of oil production to Kazakhstan for needs of the petrochemical industry at a significant discount.

The intention to implement petrochemical projects was adopted in 2008. According to the Development Program of the petrochemical industry of the Republic of Kazakhstan for 2008-2013, it was supposed to build, among other things, a single polypropylene  and polyethylene production complex. Given the capital intensity of such project, it was decided to divide it into two independent projects and implement them in stages.

Kazakhstan Petrochemical Industries. Polypropylene as a basis of new production

In November 2022, the Kazakhstan Petrochemical Industries (KPI) plant was launched in Atyrau.

KPI is the first large-scale project in the petrochemical industry of Kazakhstan with deep processing of raw materials. The KMG subsidiary will annually produce up to 500 thousand tonnes of finished products — about 1% of the global production of polypropylene.

The feedstock for the polypropylene production is propane delivered from the Tengiz field. Propane is delivered to the site of the complex by railway transport tank wagons. On average, 72 wagons with a total volume of 2 300 tonnes were discharged per day.

The KPI plant will not only cover the country’s current demand for polypropylene, but will also trigger the expansion of existing facilities and the opening of new related industries.

It is calculated that production of the petrochemical industry for the country and Atyrau region in particular for each USD will bring USD2-3 of growth in the economy. It is assumed that the contribution to the country’s GDP from the first integrated gas chemical complex will soon reach 1%.

90% of the polypropylene produced here will be exported to China, Turkey, European and CIS countries.

43 Kazakhstan enterprises took part in the project implementation. AtyrauNefteMash, Petropavlovsk Heavy Machinery Plant, Imstalcon JSC and others were engaged in the manufacturing and supply of equipment and materials. Over 4 000 jobs were created during the construction period.

For the first time, a laser scanning of 1 million points with an accuracy of dimensions up to 0.1 mm was carried out at the Kazakhstan enterprise. Each constructed part of the plant was compared with a 3D model in the process of such scanning to track the compliance of works with design and technical documentation. During the construction, 29 thousand tonnes of metal structures were installed, more than 165 thousand cubic meters of concrete were poured, 2.5 thousand kilometers of cables and 261 kilometers of technological pipelines were laid.

The new petrochemical complex meets the strictest environmental safety standards. The propane supplied to the enterprise from the Tengiz field has already been purified from harmful substances, which implies minimal formation of harmful gases and safety of production.

KPI has become the successfully implemented first phase of the integrated gas chemical complex.

The next stage is the creation of production facilities for the polyethylene and butadiene production.

KMG PetroChem LLP

KMG PetroChem LLP (formerly KLPE LLP) was established to implement the second stage of this project. The goal is to produce polyethylene with a capacity of 1 250 thousand tonnes per year. The raw material for the project is ethane in the amount of 1.6 million tonnes per year.

The project is being implemented on the territory of FEZ National Industrial Petrochemical Technopark in Atyrau region.

The feedstock for the Polyethylene project is also the gas from Tengiz field.

The total amount of funds raised (including borrowed funds and funds of foreign investors) for the project implementation is more than USD6.5 billion.

More than 8 000 jobs will be required for the construction, 875 qualified personnel will be engaged during the operational period. According to preliminary estimates, tax revenues will amount to USD5.7 billion. The country’s dividends are about USD18 billion.

It is expected that the availability of own production of basic petrochemical products will lengthen the value-added chain by developing new production facilities that will process basic products into industrial and household products with further export of finished products. The development of such approach can noticeably change the specialization of the economy of the Republic of Kazakhstan and provide significant increase in small and medium-sized businesses and new jobs.