ESN /9Q Vol. 2 Joint United R Gns Deveiop.Ne,T Prog
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ESN /9q vol. 2 Joint United r Gns DeveIop.ne,t Prog. 'id Bank -rz:) ESAAAP Energy Sector Management Assist...-, e Prrograrnme Public Disclosure Authorized Public Disclosure Authorized Kazakhstan NaturalGas Investment StrategyStudy Volume 2 Public Disclosure Authorized Report No. 199b/97 December 1997 Public Disclosure Authorized JOINT UNDP/ WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) is a special global technical assistance program run by the World Bank's Industry and Energy Department. ESMAP provides advice to governments on sustainable energy development. Established with the support of UNDP and 15 bilateral official donors in 1983, it focuses on policy and institutional reforms designed to promote increased private investment in energy and supply and end-use energy efficiency; natural gas development; and renewable, rural, and household energy. GOVERNANCE AND OPERATIONS ESMAP is governed by a Consultative Group (ESMAP CG), composed of representatives of the UNDP and World Bank, the governments and other institutions providing financial support, and the recipients of ESMAP's assistance. The ESMAP CG is chaired by the World Bank's Vice President, Finance and Private Sector Development, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme's strategic agenda, its work program, and other issues. ESMAP is staffed by a cadre of engineers, energy planners, and economists from the Industry and Energy Department of the World Bank. The Director of this Department is also the Manager of ESMAP, responsible for administering the Programme. FUNDING ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organization (OLADE), and public and private donors from countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United States. FURTHER INFORMATION An up-to-date listing of completed ESMAP projects is appended to this report. For further information or copies of completed ESMAP reports, contact: ESMAP c/o Industry and Energy Department The World Bank 1818 H Street, N.W. Washington, D.C. 20433 U.S.A. Kazakhstan NaturalGas InvestmentStrategy Study Volume 2 Appendices 1 through 3 December1997 Energy Sector Management Assistance Programme (ESMAP) Oil and Gas Division Industry and Energy Department The World Bank Contents Volume 2: Appendices 1 through 3 Appendix I 1.1 Descriptionson SelectedPriority Projects ................................................................... 1-1 1.2 PreliminaryEvaluation of Gas PipelineProjects Proposed by the Government.............................. 1-13 Appendix 2 2.1 Kazakhstan'sGas Reserves................................................................... 2-1 2.2 Presentand Future Supplies................................................................... 2-4 2.3 Gas ReserveCharacteristics in Kazakhstan................................................................... 2-15 2.4 Potentialfor LPG and CondensateExtraction and AssociatedEconomics ...................................... 2-24 2.5 Gas ProductionCost Model................................................................... 2-32 2.6 PowerStations in Kazakhstan.................................................................... 2-51 Appendix 3 3.1 Level of Fuel Consumptionin Kazakhstan................................................................... 3-1 3.2 HistoricDemand of Natural Gas by Oblast................................................................... 3-5 3.3 Gas DemandProjection .................................................................... 3-15 3.4 Supply-DemandIntegration .................................................................... 3-44 3.5 MarketValues of Natural Gas in Kazakhstan.................................................................... 3-49 3.6 Productionof Electricity/Heatand Fuel Consumptionin Almaty,Zhambyl, and Symkent............. 3-57 3.7 Descriptionof the ExistingGas Infrastructure................................................................... 3-63 3.8 Gas SupplyEconomics ................................................................... 3-82 3.9 HydraulicAnalysis of the ExistingGas TransmissionPipelines ...................................................... 3-94 3.10 ExistingOrganizational Structure of DomesticGas Operations.................................................... 3-102 3.11 NonpaymentIssues and ProposedCountermeasures .................................................................... 3-106 3.12 DomesticGas Companies'Financial Position ................................................................... 3-109 3.13 Methodsto ImproveGas Tariff Collection................................................................... 3-123 3.14 PotentialExchange Savings ................................................................... 3-133 3.15 Energy Efficiency.................................................................... 3-138 iii Contents of Volume 3: Appendices4 through 6 Appendix 4 4.1 Supply-Demand Outlook in Europe 4.2 Estimated Costs of Delivering Gas to Eastern and Western Europe 4.3 Potential Gas Exports from Kazakhstan 4.4 Export Potential Offered by UGSS Appendix 5 5.1 Gas Regulatory Framework 5.2 Gas Regulatory Principles 5.3 Information Required by the Regulatory Authority 5.4 Main Duties and Powers of the Regulator 5.5 Regulations, Standards, and Codes for Gas Transmission and Distribution 5.6 Suggested Framework and Sample Regulations for Kazakh Gas Law 5.7 Environmental and Safety Issues 5.8 Current Gas Pricing Procedures 5.9 General Principles and Issues in Tariff and Non-Tariff Pricing 5.10 Fiscal Regime Appendix 6 6.1 Financing and Resourcing iv Abbreviationsand Acronyms ADB Asian Development Bank BCF Billion Cubic Feet (109CF) BCM Billion Cubic Meters (1IO CM) BOD Barrels of Oil Equivalent per Day BOE Barrels of Oil Equivalent BOO Build-Operate-Own BOT Build-Operate-Transfer BOTAS Turkish State Oil and Gas Company BTU British Thermal Units CA Central Asia CAC Central Asia Center CAPEX Capital Expenditure CCGT Combined Cycle Gas Turbine CIF Cost, Insurance and Freight (included) CIS Commonwealth of Independent States CHP Combined Heat and Power Plant CM Cubic Meter co, Carbon Dioxide DFO Distillate Fuel Oil (gas-oil) EBRD European Bank for Reconstruction and Development EEPROM Electrically Erasable Programmable ROM EIB European Investment Bank EPC Engineering, Procurement and Construction ESMAP Energy Sector Management Assistance Programme ESCO Energy Service Companies ESR Energy Sector Report EU European Union FE Far East FGD Flue Gas Desulphurization plant FO Fuel Oil FSU Former Soviet Union G-7 USA, Japan, Germany, UK, France, Italy, Canada v GDP Gross Domestic Product GEF Global Environment Facility GOK Government of Kazakhstan GWh Gigawatt hours (IO' Wh) HSE Health, Safety and Environment IAS International Accounting Standards IBRD International Bank for Reconstruction and Development IEA International Energy Agency IFC International Finance Corporation IOCs International Oil Companies IPP Independent Power Plant Kcal Kilocalories KWh Kilowatt Hours (1O wh) LDC Local Distribution Company LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas LRMC Long-Run Marginal Cost LSTK Lump-Sum Turn-Key MCF Thousand Cubic Feet MCM Thousand Cubic Meters MMCM Million Cubic Meters ME Middle East MENR Ministry of Energy and Natural Resources MG Ministry of Geology MIGA Multilateral Investment Guarantee Agency MMBTU Million British Thermal Units MMSCFD Million Standard Cubic Feet per Day MMTCE Million Tonnes of Coal Equivalent MMTOE Million Tonnes of Oil Equivalent MOEC Ministry of Electricity and Coal Industry MOG Ministry of Oil and Gas MT Metric Tonne MW Megawatt NAG Non Associated Gas NG Natural Gas OECD Organization for Economic Cooperation and Development vi OECF Overseas Economic Cooperation Fund Opex Operating Expenditure p.a. per annum PSC Production Sharing Contract RFO Residual Fuel Oil ROM Read Only Memory R/P ratio Reserves to Production Ratio SA South Asia SAR Staff Appraisal Report SCF Standard Cubic Feet measured at 60°F and 30 inch Hg SEA Southeast Asia TCM Trillion Cubic Meters (102 CM) TCE Tons of Coal Equivalent TOE Tons of Oil Equivalent UAE United Arab Emirates UGSS Unified Gas Supply System, the transmission network of the former Soviet Union. VAT Value Added Tax WB World Bank vii Definitions OECD Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom. Eastern Europe: Poland, Czech Republic, Slovakia, Hungary, Rumania, Bulgaria, Slovenia, Croatia, Bosnia and Herzegovina, Yugoslavia (Serbia). Former Soviet Union (FSIJ): Central Asian Republics - Kazakhstan, Uzbekistan, Turkmenistan, Kirgizistan, Tadjikistan. Caucauses - Georgia, Armenia, Azerbaijan. European part - Russian Federation, Ukraine, Belarus, Moldova, Lithuania, Estonia, Latvia. Units of Measure Natural Gas 1 MCF (1,000 CF) = 28.32 cubic meter = about 1 MM BTU = 252,000 Kcal 1 CM = about 9,000 Kcal 1 BCM= 35.3 BCF= about 0.9 MMTOE = about 1.35 MMTCE = (about 2.7 million tonnes of lignite) 3 3 LNG 1 ton = LNG 2.35 m = about 1,400