Industry, innovation and infrastructure
Development of R&D and innovation, high-tech industries
Building up scientific and research potential will ensure competitiveness in the long term. We are working on the development of scientific research, building close relationships with the research community and increasing the practical effect of scientific research, including with the support of research work by domestic personnel. Important attention is paid to the issues of commercialization of research and development work in order to obtain a timely economic effect from scientific developments.
We have created a Center for Scientific and Technological Initiatives – a “single window” for scientific and innovative activities. This step coordinates more effectively the work on the development of scientific research, industrial innovations and innovation culture in portfolio companies, and will ensure the introduction of domestic and foreign research and development activities (hereinafter referred to as R&D) in production.
According to the results of 2022, the CSTI considered more than 120 applications for R&D (according to the procedures of the Corporate Standard on R&D and Innovation adopted on March 17, 2022), of which 70 projects totaling KZT8.5 billion were approved for implementation at meetings of the Scientific and Technical Council of the Fund, including 51 projects of JSC NAC Kazatomprom, 12 projects of JSC NC KazMunayGas, 4 projects of Samruk-Kazyna Ondeu LLP, 2 projects of Samruk-Energy JSC and 1 project of JSC NMC Tau-Ken Samruk.
At the moment, we are implementing a new information system to support scientific and innovative activities, which will provide for the internal needs and features of the business processes of the Fund Group, and will also include all the necessary functions to ensure the reception and consideration of applications for R&D. Additionally, it is expected to launch and ensure an effective and transparent mechanism for the selection, examination and monitoring of R&D projects, taking into account international experience. As part of the work plan, an innovative audit of the Fund Group will be conducted, an analysis of the state of development of the scientific, technical and innovative infrastructure of the Fund Group enterprises and the development of appropriate recommendations. GRI 203-2
Resource base development and infrastructure modernization
Currently, a shortage of the gas resource base in the country is expected due to ambitious plans for gasification and decarbonization of industry, development of gas chemical industries.
At the same time, resource development is limited by the following key constraints:
- the sale of gas for domestic consumption is unprofitable for market participants. The current gas purchase price from subsurface users is lower than the cost of its production, and the actual sales price (current wholesale and retail gas sales price) is lower than the cost of sales;
- due to the general unprofitability of the gas market, the interest of private investors is low.
In conditions of impending shortage, increasing the resource base is a strategically important priority for the Fund.
Increasing the extraction of raw materials using the full capacity of production enterprises will help to realize the export potential. It will also ensure the independence of raw materials to create a base for the production of products with high added value, where special attention will be paid to the goods in demand in accordance with the analysis of potential global needs.
The increase in the resource base is possible due to the implementation of new exploration projects, as well as the expansion of existing fields.
Thus, in 2022, according to the results of exploration and additional exploration at existing fields, the total increase in 2022 amounted to 19 million tons. Based on the results of basin modeling and analysis of historical data, 5 most promising sites have been identified that require additional research by staging advanced seismic surveys as part of the geological study of the oil subsurface.
The package of priority projects of the Fund also includes the construction of gas processing facilities projects. As part of the increase in commercial gas resources to 30 billion m3 per years, JSC NC QazaqGaz is implementing a project for the construction of the Kashagan Gas Processing Plant with a capacity of 1 billion m3 per year. In addition, it is planned to implement a project to increase the processing of Kashagan gas at stage 2A with a capacity of 2-4 billion m3 per year.
Commissioning of new generating capacities in 2024–2031 (the restoration of power unit No. 1 at Ekibastuz GRES-1 with the installation of new electric filters, the expansion of Ekibastuz GRES-2 with the installation of units No. 3 and No. 4, the construction of GRES-3, etc.) will increase the coal consumption of the stations by 233 % and will amount to about 37.8 million tons per year, that requires an increase in coal production at the mines of Samruk-Energy JSC.
Modernization of existing and construction of new infrastructure
In 2022, 5 projects for KZT1 344 billion were introduced.
In 2022, the work was carried out on the first package of priority investment projects, including the reconstruction and expansion of the Astrakhan-Mangyshlak water pipeline, construction of a desalination plant in the village of Kenderli, gasification of the Sarsha area and the Warm Beach resort area, reconstruction of the Mangystau region gas transmission system, construction of the Kashagan gas processing plant with a capacity of 1 billion m3, construction of the main gas pipeline looping Makat-North Caucasus and gas infrastructure for gas supply of Almaty CHP plants 1, 2 and 3.
In 2022, the plant of Kazakhstan Petrochemical Industries Inc. LLP was commissioned, which should promote seriously the Kazakh gas chemical industry and will produce 500 thousand tons of various grades of polypropylene per year. The company has a large export potential: 10 % of products are planned to be sold on the domestic market, based on needs, and 90 % – for export to Europe, Turkey, China and the CIS.
JSC NC KazMunayGas has also implemented projects on modernization of crude gas injection compressors at the Kashagan field and install the 4th gas re-injection compressor at the Karachaganak field. An important strategic event for JSC NC KazMunayGas was the acquisition of an 8.4 % stake in the Kashagan project from the Fund for $3.8 billion.
A 60 MW wind farm with the prospect of expanding to 300 MW in the Shelek Corridor, a unique region for the development of renewable energy potential, was put into operation. The new plant includes 24 wind power plants, each with a nominal capacity of 2.5 MW. The new wind farm will generate 225.7 million kWh of electricity per year.
KEGOC has implemented a project to build a substation “Ortalyk” with a capacity of 220 kWh in the Turkestan region. In 2022, the substation was put into operation. The aim of the project is to increase the energy security of the Republic of Kazakhstan and the reliability of the national energy system. The construction of a mixed cycle plant with a flexible generation regime will create favorable conditions for the integration of renewable energy sources into the energy system of the Republic of Kazakhstan.
In November 2022, binding documentation was signed on the entry of the strategic partner SIBUR Holding PJSC into projects for the production of polypropylene and polyethylene.
The Fund has identified a list of priority projects consisting of two packages. The first package includes 13 projects for KZT3.6 trillion. These are water supply projects in the western regions of Kazakhstan, projects in the field of gas supply, electricity and the development of railway transport. The second list consists of 20 projects for KZT20.4 billion. These are projects in the field of petrochemistry, gas supply, electricity, including renewable energy, telecommunications and the development of railway transport.
In 2023, it is planned to launch 14 projects for KZT 1.6 trillion with the creation of 1.3 thousand permanent jobs. 4 projects are included in the priority list.
Decent work and economic growth
Industrial development and job creation
Taking into account the current socio-economic situation of the country’s development and the role of the Fund for the national economy (the Fund’s share in the country’s economy was 5.7 % in 2022), we are focused primarily on investments in the economy of Kazakhstan, including for implementation of strategic projects. The management model of the Fund in the next 7 years is defined as a strategic holding with the tasks of maintaining the social and infrastructural development of the country.
The Fund continues to perform the function of supporting the country’s economy through the implementation of infrastructure projects, as well as regional and industrial development projects.
In accordance with the Fund’s investment policy, which includes the principle of responsible investments and takes into account the ESG criteria, the Fund implements two packages of priority investment projects of the Fund group totaling more than KZT24 trillion. These projects cover the areas of expansion of critical infrastructure of oil and gas chemistry, electric power, gas infrastructure, railway transport, telecommunications, construction of wind power plants with innovative energy storage systems for Kazakhstan. (Table 7).
The implementation of priority projects will have a long-term effect on the activities and value of the Fund’s assets, will create new jobs, and will also be system-forming and will affect the development of industries and the strengthening of the national economy, will have an impact on improving the investment climate as a whole.
New product conversions and the creation of industries
The key role of the Fund in the economy of the Republic of Kazakhstan is diversification and development of the economy through investments in high-tech projects, especially in the field of processing raw materials and creating value chains. To do this, we are actively working to attract large foreign investors to implement innovative projects. This is done through a strategic Partnership with foreign investors, which allows creating conditions for implementation of projects with high growth and development potential (for example, construction of wind farms with innovative systems for Kazakhstan electricity storage).
Special attention is paid to high-tech industries that can increase added value in the industrial sector.
An example of such a project is the integrated gas chemical complex, opened in November 2022, the operator of which is a subsidiary of the Fund – Kazakhstan Petrochemical Industries Inc. (KPI) LLP. KPI is the first large-scale plant in the petrochemical industry of Kazakhstan, carrying out deep processing of raw materials. The project is aimed at diversifying the economy of Kazakhstan and moving away from the raw materials orientation of exports. The plant produces up to 500 thousand tons of polypropylene per year, which is about 1 % of the world’s polypropylene production, and allows Kazakhstan to become one of the world’s leading producers of this product. Additionally, in the period from 2023 to 2027, the Fund plans to implement a project for the production of polyethylene and the necessary infrastructure, thereby continuing the creation of new product conversions and the development of industrial industries.
It is planned to implement projects for the development of new repartitions in various industries, such as chemical, food (creation of gelatin production, production of a full cycle of fruit growing, creation of an agricultural Fund), manufacturing (production of sandwich panels from mineral wool slabs, production of thermal insulation materials), construction.
A detailed list of projects is given in table No. 7.
Human resources development and job creation
Creation of new jobs has important aspects for the regions where we operate: social (reducing unemployment, improving living standards), economic (economic growth, small business development), human resource development (attracting and developing specialists) and economic diversification (reducing dependence on certain sectors).
The Fund is the largest employer in the country. The number of jobs created in the Fund’s group in the reporting year exceeded 259 thousand people. Entering new product conversions sets new tasks for the Fund to build human resources, strengthen competence in new areas and continuously improve the skills of employees based on the best world practices.
In 2022, 5 projects were commissioned in the sectors of petrochemistry, energy in the amount with the creation of 5 682 temporary and 709 permanent jobs. GRI 203-2
The implementation of new investment projects of the Group of the Fund will create about 50 thousand jobs. GRI 203-2
Increasing labor productivity plays a key role in increasing incomes and well-being of the population. We strive for the rational use of resources and the well-coordinated functioning of all factors of production today, for the preservation and maintenance of future generations. This requires concentrating the Fund’s current programs and plans on increasing labor productivity – creating productive jobs in high-value-added sectors and applying advanced technologies in production. According to the National Development Plan of the Republic of Kazakhstan, the goal is to increase labor productivity across the country by 45 % by 2025. The Fund has reflected this goal in the Development Plan for 2023–2032 and plans to increase labor productivity by 1.5 times by 2032 compared to 2021.
Equal access to infrastructure and markets
As part of reforming the Fund’s Group of Companies, efforts continue to stimulate the development of domestic business by ensuring equal access to infrastructure and markets.
Samruk-Energy JSC carries out centralized sale of electric energy from Ekibastuz GRES-1, GRES-2 and Moynak HPP as part of a single group of entities. The purpose of selling electric energy from a single group of entities is to provide equal conditions to market entities, excluding discrimination due to differences in approved marginal tariffs. Centralized sale of electric energy determines the weighted average cost of electricity for all market entities.
According to the instruction of the President of the Republic of Kazakhstan, further gasification of the country, including the northern regions, will be continued in order to increase the coverage of the population with natural gas to 13.5 million people (65 %) by 2030. As part of implementation of this instruction, various options are studied, including the construction of further stages of the Saryarka main gas pipeline project.
Also, according to the Action Plan for implementation of the pre–election program of the President of the Republic of Kazakhstan “Fair Kazakhstan – for all and for everyone. Now and forever”, the Fund was entrusted with the task of providing the domestic market with the main types of petroleum products by increasing the volume of processing to 21 million tons per year. Within the framework of the draft roadmap developed by the Ministry of Energy of the Republic of Kazakhstan, the basic design of the expansion of the Shymkent Oil Refinery from 6 to 9 million tons per year has begun. The completion of the Shymkent Oil Refinery expansion project is scheduled for 2029. The increase in the design processing capacity at the Shymkent Oil Refinery will increase the volume of processing to 21.3 million tons per year.
We will ensure the introduction of transparent mechanisms and the removal of barriers for participants in the gas markets, coal and electricity supplies, railcar supply and access to other infrastructure.
Clean water
We are implementing projects aimed at solving water supply issues in the regions of our presence.
In 2022, a reservoir water desalination plant was launched at the Karazhanbas field. The aim of the project is to solve the social problems of drinking water shortage in the region. GRI 203-2 Now Karazhanbasmunai JSC uses in its activities the products of the plant (purified water extracted along the way) for production purposes instead of Volga water. As a result of a decrease in the consumption of fresh water by the deposit (by 1.2 million m3), an additional 1.2 million m3 of Volga water is redistributed to the population of the region.
The project on reconstruction and expansion of the Astrakhan-Mangyshlak main water pipeline is implemented in order to solve the water shortage in the western regions and provide water to the population, agricultural producers, industrial and oil and gas producing enterprises. The water pipeline is the only centralized source of water supply for consumers of Kurmangazinsky, Isataisky and Zhylyoisky districts of Atyrau region with an actual annual water supply volume of 4.8 million m3, as well as for the city of Zhanaozen, Beineu, Mangistau, Karakiyansky and Tupkaragansky districts of Mangistau region with an annual water supply volume of 10.5 million m3. The population consuming water is more than 35 % of the population of Mangystau region and more than 28 % of the population of Atyrau region. Water consumption by the population is growing by 4-5 % annually. The reconstruction project provides for an increase in the capacity of the main water pipeline and the renewal of worn-out equipment. Construction and installation work began in 2022, the project is scheduled to be completed in 2023.
The Fund plans to implement another project “Construction of a seawater desalination plant in Kenderli with a capacity of 50 000 m3/day”. The project is scheduled to be completed by the end of 2024. GRI 203-2 The aim of the project is to provide drinking water to the population and enterprises of Zhanaozen and nearby settlements. The project is low – profit and is implemented at the expense of the Fund Group’s own funds. The implementation of the project will reduce the technological load on the Astrakhan-Mangyshlak main water pipeline in proportion to the design capacity of the desalination plant.
Affordable and clean energy
Reliable energy
To support the population and improve living conditions in Kazakhstan, JSC NC QazaqGaz, whose gas distribution network is represented in 16 regions of the country, including newly formed ones, implements socially significant projects in the regions of its presence. The implementation of the activities of JSC NC QazaqGaz has a high social and strategic importance for the regions of its presence:
- ensuring energy security, reliable and uninterrupted gas supply;
- transfer of industrial facilities and business entities to natural gas.
By the end of 2022, 57.7 % of citizens (11 million people) have access to gas. In 2022 143 000 new consumers in 160 settlements have obtained access to gas. According to the instruction of the Head of State, further gasification of the country, including the northern regions, will be continued in order to increase the coverage of the population with natural gas to 13.5 million people (65 %) by 2030. In 2022, the lost profit of JSC NC KazMunayGas amounted to KZT453.9 billion.
Currently, the Fund adheres to the policy of further restraining the growth of gas prices for domestic consumers. Gas prices for socially unprotected segments of the population will be restrained as a priority. JSC NC QazaqGaz carries out wholesale sales of commercial gas at marginal wholesale prices approved annually by the Ministry of Energy. GRI 203-2
Resource saving
A comprehensive strategy is needed to minimize the negative impact on the environment, in particular on the climate. This means developing environmentally conscious thinking, obtaining global ESG assessments, and using digital innovations to track environmental impacts.
The Fund’s assets are focused in such important sectors of Kazakhstan’s economy as electric power, mining and processing of minerals, transport and telecommunications, which have significant energy saving potential, as the results of energy audits show.
The Fund is constantly working to improve energy efficiency and reduce the energy intensity of its productions. Thus, from 2014 to 2020, a comprehensive Energy efficiency Improvement Program was implemented, the implementation of which has already allowed reducing the energy intensity index of the gross volume of marketable products by 27 % compared to 2014 (up to 3.6 toe /KZT million). As part of the modernization and energy saving, the old (less efficient) equipment is replaced with a new one, the transition from fuel oil to natural gas (as fuel at mining facilities) and the use of new generation additives to increase the flow rate.
Clean air
The high share of the use of coal for electricity and heat generation, as well as the presence in our portfolio of companies using hydrocarbon fuels to support their production and operational activities, make a key contribution to air pollution and the impact on climate change (the Fund’s enterprises account for 26.5 % of the emissions of pollutants in the country2).
One of our main environmental objectives is to reduce emissions of pollutants as a result of production activities and achieve a zero level of regular flaring at oil and gas producing assets.
We plan to continue implementing measures aimed at reducing emissions of pollutants: conversion of coal-fired power to natural gas, expansion of low-carbon power generation (NPP and RES) modernization of technological equipment, introduction of energy-saving technologies, optimization of thermal energy generation and consumption, as well as the development of our own low-carbon generation sources, as well as the use of the best available techniques (clean coal technologies and emission capture technologies).
The Fund’s power plants completed the replacement of electric filters with new generation filters from the world’s leading manufacturers-leaders in the field of ash collection. The capture KPI of 99.6 % was achieved. Measures on modernization of the electric filters reduced ash emissions into the atmosphere by 17 thousand tons per unit. Low-emission burner devices were introduced, providing a concentration of nitrogen oxides of no more than 650 mg/m3.
We continue the program on equipping 12 objects of the first hazard category with automated systems for monitoring emissions of pollutants (in the sectors of oil and gas production, oil and gas refining, gas chemistry, electricity production), which allow monitoring emissions into the environment in real time. The installation has been completed at two sites. At the remaining facilities, the installation is expected to be completed during 2023.
The portfolio of projects planned for implementation in the near future includes projects to reduce the negative impact on the environment of Almaty by switching stations to natural gas combustion, as well as providing consumers of Almaty and the Almaty region with reliable and uninterrupted supply of heat and electricity:
- modernization of Almaty CHP-2 with minimization of environmental impact, involving the construction of a new plant using gas turbine technologies with a capacity of up to 600 MW at the site of Almaty CHP-2;
- reconstruction of Almaty CHP-3 on the basis of CCGT with an increase in the station’s capacity to 450 MW;
- construction of a 200-250 MW CCGT at the site of Almaty CHP-1.
According to experts, the gasification project of the plant meets the most stringent requirements of the Republic of Kazakhstan and the European Union. The expected reduction in emissions of pollutants after the gasification of the Almaty energy complex is by 88 % (or 8 times) from 49.6 thousand tons to 6 thousand tons. The expected reduction in specific emissions of pollutants for the Samruk-Energy Group of Companies is by 14 % from 10.1 g/kWh to 8.6 g/kWh.
The work is also underway in the oil and gas production and refining sector to reduce emissions of pollutants. The oil refineries of JSC NC KazMunayGas Group of Companies are included in the National Project “Green Kazakhstan”, the purpose of which is to improve air quality in Kazakhstan. As part of this project, it is planned to reduce the emission limit at these plants from 30.7 to 20 thousand tons per year (reduction of up to 35 %). Within the framework of the project, measures aimed at reducing air pollution will be implemented by 2025. Oil refineries have approved Action Plans with targets for energy and resource conservation and reduction of emissions into the atmosphere by 2031, including such measures as replacement of technically obsolete burners on process furnaces, return of flare gases to the fuel network of the plant, modernization of the vapor capture system when steaming reactors of the delayed coking plant, transfer of bulk operations for light oil products on the overpass of hermetic filling, installation of pontoons on tanks, etc.
One of our most important tasks to reduce emissions into the atmosphere is to increase the useful use and utilization of crude gas, to minimize flaring of gas in the sector of oil and gas production and processing, as in one of the largest emitters of pollutants in the Fund. In an effort to minimize the volume of regular burning of crude gas, JSC NC KazMunayGas in 2015 supported the initiative of the World Bank “Full utilization of associated petroleum gas by 2030”.
In recent years, a number of measures have been implemented to increase the useful use of crude gas, as a result, this indicator has been improved and amounted to 98.8 % by the end of 2022. The volume of flaring of crude gas in comparison with 2017 decreased by 89 %. The gas combustion rate is at the level of 1.5 tons per 1 thousand tons of produced UVS (in 2021 – 2.1, in 2020 – 2.2), which is 29 % lower than in 2021 and 84 % lower than the industry average IOGP.