Special Energy Issue on |July 2018

CONTENTS GENERAL ...... 1 OIL & GAS PRODUCTION ...... 2 OIL & GAS EXPORT & TRANSPORTATION ...... 3 OIL & GAS INFRASTRUCTURE ...... 4 PROCESSING & REFINERY ...... 4 RENEWABLE ENERGY ...... 5 UPCOMING INDUSTRY EVENTS ...... 6 CONTACTS ...... 6

The Economic Section of the Embassy of the Kingdom of the Netherlands in Kazakhstan intends to distribute this newsletter as widely as possible among Dutch institutions, companies and persons from the Netherlands. The newsletter summarises economic news from various Kazakhstani and foreign publications and aims to provide accurate information. However, the Embassy cannot be held responsible for any mistakes or omissions in the bulletin.

SPECIAL ENERGY ISSUE, July 2018 Embassy of the Kingdom of the Netherlands GENERAL Kashagan helps to develop Kazakh companies The North Caspian Operating Company NV, operator of the , held a series of solemn events in to award prestigious certificates of the American Society of Mechanical Engineers to KazTurboRemont and ZhigerMunaiServis companies. For more than 15 years, NCOC has been uniquely positioned to help Kazakh companies through the implementation of international standards ISO, ASME, API, certification and training in vocational skills and many other areas. On July 11, NCOC conducted a solemn ceremony to award the certificate of ASME to the Kazakh company KazTurboRemont. The plant is one of the contractors of the North Caspian project and performs a full range of services, from design to commissioning, for oil and gas, energy, chemical and mining industries in accordance with international quality and safety standards. As noted by the Deputy Managing Director Zhakyp Marabayev: “This year the North Caspian project celebrates its 25th anniversary, being the largest project in Kazakhstan attracting foreign direct investments. Kashagan makes a significant contribution to development economy through the creation of jobs for Kazakh specialists and the provision of opportunities for local companies. The KazTurboRemont and ZhigerMunaiService companies are a vivid example of successful cooperation with NCOC and the implementation of and their certification began in 2016 and now, having gone through a difficult way to implement the ASME standard, enterprises can be rightfully proud of the results achieved.” On July 16, the management of NCOC handed over the certificate of ASME to another Kazakh company with a long and successful history, ZhigerMunaiService. Production sites of this plant produce drilling rigs, oil and gas equipment and much more. As the head of the company Rafik Mukhatov noted: “Thanks to cooperation with the North Caspian Consortium, the company has raised its level, and due to constant training and certification the services of the enterprise are in demand in large international companies.” The process of consulting and certification lasted more than a year, and finally both companies received the certificate of U stamp authorisation from the American Society of Mechanical Engineers, which was founded in 1880 and developed the ASME standard. It allows companies to export their products to more than 100 countries. Certification for ASME and the ability to stamp means that this product has passed all the necessary list of tests and fully complies with international quality standards, and the production itself has everything for successful competition with global brands, TengriNews reports.

OIL & GAS PRODUCTION Kazakhstan to increase oil production to over 100 million tons in 2025 Kazakhstan intends to increase oil production from the current 87 million tons per year to more than 100 million tons in 2025, Energy Minister Kanat Bozumbayev said at the roundtable “Kazakhstan’s Energy Potential — Investments into a New Stage of Development”, held as part of the Kazakhstan Global Investment Roundtable in Astana on July 3, the Kazakh Invest National Company for Investment Support and Promotion reported. “The Kashagan oilfield is expected to increase production and refining of oil. The Karachaganak development plan provides the existing level. The implementation period by 2020 is $1.5 billion. Over 30 thousand Kazakhstani citizens work at the as part of the expansion project. And the volume of investments in this project exceeds $38 billion. Development over the past two years has exceeded $11 billion, this year - more than $7 billion,” said Bozumbayev. In general, the energy minister recalled that Kazakhstan has the largest oil and gas reserves and reserves. Only the primary natural resources of the oil equivalent are estimated at 32 billion tons, which is 3.6% of the world’s reserves. Every year significant investments are made in the energy sector of the country, of which the oil and gas industry accounts for a large part. In connection with this, such large oil and gas projects as Kashagan, Karachaganak and Tengiz are

2

SPECIAL ENERGY ISSUE, July 2018 Embassy of the Kingdom of the Netherlands

successfully implemented. Investments in their development exceed $120 billion, Times of Central Asia reports.

Kazakhstan boosts oil, gas, fuel and electricity production Kazakhstan’s fuel and energy industry is showing signs of growth. This year, Kazakhstan has increased oil production 6%, gas production 6.4% and electricity production 7.3%. “In the first half of the year, fuel and energy industry show positive growth, with oil and condensate production reaching 45.2 million tons. The latter is an increase of 6.2% compared to the same period in 2017,” Kazakh Minister of Energy Kanat Bozumbayev said at a recent government meeting. In particular, three major oil projects produced 27.2 million tons in total. Kashagan field production reached 6.2 million tons, Tengiz 14.7 million tons, Karachaganak 6.3 million tons. The total oil export is 36.5 million tons of oil, increased by six percent compared with the same period of 2009. The volume of refined oil is 7.7 million tons, showing an increase of 5% in comparison with the same period last year. The minister also said the volume of production of oil products at the three refineries reached 5.4 million tons. This figure increased 1.5% in comparison with the same period last year. The volume of gas production was 28.1 billion cubic metres. Growth for the first half of the year is 6.4%. Gas exports reached 10.7 billion cubic metres, which is 35.4% more than in 2017. At that, 1.5 million tons of liquefied gas was produced, which is 4.8% more than in the period of last year. Petroleum bitumen production is 375,000 tons, which is 30% more than in the last year. The export of bitumen reached 23,800 tons, which is 19% higher than in the same period in 2017. Electricity production reached to 54.5 billion kWh with an increase of 7.3%. “In general, the situation in the market of petroleum products is stable and there is no deficit on fuel and lubricants. The quantity of fuel residues is sufficient to cover the domestic market’s demand for gasoline (351,000 tons), diesel fuel (255,000 tons) for a month,” the minister said. Oil refineries have delivered 375,000 tons of fuel for agricultural producers for their spring sowing campaign. The volume of coal production (excluding coal concentrate) is 52 million tons, showing an increase of 5.1% compared to the same period of the last year, Astana Times reported.

Kazakhstan will not increase oil production in 2018 Kazakhstan is not going to increase oil production from the current 1.8 million barrels per day in 2018, despite OPEC's decision on the possibility of increasing oil production, Kazakh Energy Minister Kanat Bozumbayev said, the Interfax-Kazakhstan reported. “Production level we had will remain at 1.8 million barrels per day. It will stay the same until the end of the year. In addition, we do not need to increase,” he told reporters. At the same time, the Minister of Energy admitted the possibility of increasing oil production from next year. “Yes it is possible. While it is difficult to say how much. We will determine and announce Kashagan levels by the end of the year,” he said. Kazakhstan’s obligations in the framework of OPEC + are 1.68 million barrels per day, but the country almost always exceeded its limit and extracted about 1.8 million barrels per day due to the launch of the new project to develop the Kashagan field, capital reports.

OIL & GAS EXPORT & TRANSPORTATION Caspian Pipeline Consortium increased oil shipments by 11% to 30.3 million tons Shipments of oil in the first half of 2018 at the sea terminal of the Caspian Pipeline Consortium amounted to 30.3 million tons, which is 11% more compared to the same period in 2017, according to information provided by the press service of the CPC.

3

SPECIAL ENERGY ISSUE, July 2018 Embassy of the Kingdom of the Netherlands

For June 2018, more than 5 million tons were shipped at the sea terminal of CPC-R, which is 328,800 tons more than in the same period last year. Of the shipped volume, 2.1 million tons are oil from the Tengiz field, 877,000 tons are raw materials from the , and 1.2 million tons are produced by Kashagan. Russian shippers for the CPC-R oil pipeline system exported 669,000 tons in June. The CPC pipeline connects the oil fields of the west of Kazakhstan and the Russian deposits on the Caspian shelf with a sea terminal in Novorossiysk. Its length is 1511 km. The capacity of the system is 67 million tons of oil per year. About 75% of Kazakhstan’s export oil resources are pumped through the CPC pipeline, Atameken Business Channel reports.

KazTransOil reduced transit of oil in the first half of 2018 by 1.3% The volume of oil transportation by the largest oil pipeline company of Kazakhstan, KazTransOil, for the first half of 2018 amounted to 22.427 million tons, which is 1.3% less than for the same period in 2017. Consolidated volumes of oil transportation amounted to 27.992 million tons, which is 3% less than in January-June 2017. The cargo turnover of oil decreased by 0.8%, to 18.816 billion ton- kilometres. In May, KazTransOil and the Caspian Pipeline Consortium-K signed a five-year contract for technical maintenance of the facilities of CPC-K, according to REGNUM.

OIL & GAS INFRASTRUCTURE Amarinth delivers API 610 OH2 pumps to Schlumberger for Kazakhstan Amarinth has delivered API 610 OH2 pumps worth $500,000 to Schlumberger which will be deployed on a process water treatment package in Kazakhstan’s Dunga oil field, according to World Pumps. The order, for six API 610 OH2 super duplex stainless steel pumps, was the first that Schlumberger placed with Amarinth. The pumps were required on a very tight 26-week delivery. The Dunga field, operated by Maersk Oil, is an onshore development located 50 km north east of the town of Aktau on the east coast of the in western Kazakhstan, and is currently producing around 15,000 barrels of oil per day. The pumps will operate in the challenging Kazakhstan environment that can see temperatures reach 45ºC in summer and -30ºC in winter. Amarinth has supplied pumps to other Maersk Oil projects over the years and so was already familiar with the company’s specifications. The UK company had also manufactured pumps for other fields in Kazakhstan. Oliver Brigginshaw, managing director of Amarinth, said: “We are delighted to have delivered this first order from Schlumberger for Maersk Oil, particularly as the pumps were destined for Kazakhstan, a region where we already have a lot of experience. We look forward to working on future projects.”

PROCESSING & REFINERY Kazakhstan reveals planned volume of gasoline output at three refineries The volume of gasoline production at three oil refineries of Kazakhstan, namely, Pavlodar, Atyrau and Shymkent, is expected to stand at 4.102 million tons by late 2018, said the country’s Vice- Minister of Energy Magzum Mirzagaliyev. “It is planned to produce 3.572 million tons and 5.220 million tons of K4 and K5 gasoline at Kazakh refineries in 2018 and 2019, respectively, in accordance with the requirements of the Technical Regulations of the Customs Union,” he said. Mirzagaliyev noted that after completing the modernization of the refineries, Kazakhstan’s domestic market demand will be completely covered by the local oil products.

4

SPECIAL ENERGY ISSUE, July 2018 Embassy of the Kingdom of the Netherlands

“Kazakhstan’s refineries will fully meet the domestic market demand for petroleum products by late 2018. Excess volumes may be exported,” he said. Modernization of the Pavlodar petrochemical plant was completed in December 2017. At the same time, the modernization of Atyrau oil refinery has been completed. As for the reconstruction and modernization of the Shymkent oil refinery, the first stage was completed in June 2017, and the second stage was finished on March 15, 2018. Currently, commissioning work is underway there, which is expected to be completed by September 2018, Kazinform reports.

RENEWABLE ENERGY Mangistau plans wind energy park The wind power plant with a capacity of 42 megawatts will be built in Mangistau region of Kazakhstan, the press service of the governor of the region reported July 23. The signing of a Memorandum of cooperation on the implementation of the project of construction of a wind power plant in the area of Fort-Shevchenko city has taken place at the regional governor’s office, the message says. The document was signed by South Wind Power LLP and Horgos Jiuhe SilkBridge New Energy Co companies and Head of Mangistau oblast administration Yeraly Tugzhanov, the message said. The investors are planning to build 17 wind generators with a capacity of 2.5 kilowatts according to the terms of the contract. It is planned to allocate 60 million for these purposes. “The construction of the wind power plant refers to the issues of transition to a “green economy”, the introduction of environmentally friendly innovative technologies, and this project will help to meet the needs of the region in electricity. The construction of the wind farm with a capacity of 42 megawatts will begin on 375 acres of land in Tupkaragan district. The oblast administration has put in front of investors a target to start construction in August this year”, said Tugzhanov. It is noted that the land plot for construction has already been defined, the necessary documentation has been developed and agreed, positive conclusions of examinations have been obtained. Also, this project has been included in the plan for the placement of facilities for the use of renewable energy sources, a purchase agreement with the settlement and financial center has been signed, a contract for connection to the networks has been signed with Mangistau Electricity Distribution Network Company JSC was signed, AzerNews reports.

5

SPECIAL ENERGY ISSUE, July 2018 Embassy of the Kingdom of the Netherlands UPCOMING INDUSTRY EVENTS KIOGE International Oil & Gas Exhibition and Conference 3 – 5 October 2018, Almaty Organizer: Iteca www.kioge.kz

CONTACTS

Embassy of the Kingdom of the Embassy Office in Almaty Netherlands 103, Nauryzbai Batyr Str. 62, Kosmonavtov str. 050022 Almaty Chubary mcrd, 3rd floor T: +7 727 2503773 010000 Astana [email protected] T: +7 7172 555450 [email protected]

6