Kazakhstan gained its independence in 1991 after collapsing of the Soviet Union and immediately began to seek ways to implement the use of their own oil sources. It is estimated that the country has resources between 30 and 40 billion tons of oil.

With geopolitical position in Central Asia, Kazakhstan has borders with countries such as Russia and China and is one of the largest countries in the Eurasian space. The main oil fields in Kazakhstan like Tengiz oil field which is located on the northeast shores of the Caspian Sea, then the Karachaganak oil field located inland near to Russian border, another Kashagan is one of the largest field with projected reserves of somewhere between 7 and 13 billion Barrels, and the Kurmangazy field, located in northern Kazakhstan. As it seen the major oil fields are located in the western part of the country near the border with Russia. Although there is some small oil fields near the Chinese border, their industrial exploration has not yet to begin

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Neighborhood with Russia and China play the key role in the development of national energy policy. For example, Kazakhstan is interested in cooperation with Russia firstly because this country is the main transit route for oil exports to the European markets. Indeed, during the Soviet period the only oil pipeline from which export of oil from Kazakhstan was possible has been linked to the Russian city of Samara, where through internal oil pipeline infrastructure came to the Black Sea port of Novorossiysk.

Subsequently in 2001 with the aim to exp[ort of oil from Kazakhstan Caspian Pipeline Consortium was built which is also passing through Russia. The length of this pipeline is about 1510 km, and connects the Tengiz oil field with the port of Novorossiysk. It also plans to export oil extracted from fields Kashagan and Karachaganak to date through this pipeline. Nowadays about 700,000 barrels of oil a day transported from this line.

Russia also interested to transport Kazakh oil through own territory, which in turn may conduct its own energy policy in the European countries. The emergence of alternative ways to export Kazakh oil to the West poses a threat to Russia policy. Examples for such possibility can be shown Azerbaijan, which is after the construction of the main pipelines for oil and gas exports, began follow more independent policy and has prevented Russian policy of pressure on Georgia, starting export its own gas to the country.

Regarding China, this country with a rapidly growing economy desperately needs to import oil and gas. Lacking its own energy resources, the country is largely dependent on external supply mostly from the Middle East. Given the political climate in the region, China needs to diversify imports for its hydrocarbon industry. One of such source for China is Kazakhstan. Export of energy to China is also in interest of Kazakhstan. Deliveries in the country will enable the country to diversify its exports, transported across Russian territory.

The export from Kazakhstan to China started construction of an oil pipeline from Atyrau to Alashankou, in the Xinjiang Uygur Autonomous Region of China and in 3000 km in length. This pipeline is built by the China National Petroleum Corporation and Kazakhstanian oil company KazMunayGas. Overall, it possible to transport from this pipe about 20 million tons of oil per year.

By the end of 2005, construction of the pipeline was finished. The event enabled Kazakhstan to a certain foreign policy related to energy projects. Kazakhstan is planning to increase its oil production by 2015 to 150 million tons a year, formally announced his desire to join the newly delivered BTC pipeline in operation.

Pre knowing reaction to the statement Kazakhstan, in the short term, dividends received and on the willingness of Russia to control the entire oil exports of Kazakhstan. And in this case, at a meeting of the Presidents of Russia, Kazakhstan and Turkmenistan may seem that Russia has made its own. Indeed, the President of Kazakhstan Nursultan Nazarbayev during the meeting with President Putin said that Kazakhstan wishes to continue to export up to 80% of total exports to 52 million tons west through Russia. However, we should not forget that oil production in Kazakhstan will grow including exports to the western direction. It is therefore expected that Kazakhstan will not abandon the Azerbaijani export oil to the West. In short term Kazakhstan has certain desired results on privatization of Orenburg refinery located in Russia, and working on Kazakh oil. There has been another discussion about Kazakhstan's participation in pipeline construction Burgas-Aleksandropoulos.

In addition, Kazakhstan has suffered some loss of Russian monopoly transport Kazakh oil. Planned by Kazakhstan privatization of Lithuanian refinery was failed because of refuse to allow Russia to export 12 million tons of oil a year through its territory which planned to be processed in Lithuania. Another possible problem in the same reason for Kazakhstan is ambition of Russia to increase tariffs for the transportation of Caspian oil through the pipeline Caspian Pipeline Consortium.

It should be noted that one of assessed participants of consortium is the Russian pipeline monopoly Transneft. The share of this company is 24%. Pipeline Caspian Consortium is the only private pipeline crossing the territory of Russia. Given that Russia is pursuing a policy of monopoly in the energy sector, it also intends to increase its influence in the consortium.

Kazakhstan is not satisfied with the role of only exporter of energy in the Eurasian space. The country intends to play an active role in shaping energy policy. And if in the short run this country lacks sufficient tools to realize its objectives in the medium term it would make to have these mechanisms in place. And the first step in this direction would be a way of diversifying of export of oil.

Rovshan Ibrahimov, rovsen@azerimail.net

Editor of USAK Energy Review

This commentary is from USAK's Energy Review Newsletter
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