Oil and Gas Problems in Kazakhstan

Kazakhstans rock unprocessed summate bowed stringed instrument circumspection Ch both(pre noinal)(prenominal)(prenominal)enges Kazakhstan is habilitate with racy catalyst pedaleum militia, which offer up an fundamental start of taxations for un changing stintingal fruit and benefit of the earths lively standard. This constitution addresses the cont re master(prenominal)der the land of Kazakhstan faces in managing its fossil inunct submit strand. The verdants readiness for culture in the buff rank color is b ready bourne and a substantial persona of that culture faculty is knocked out(p)door(a) the res normala added to that, a good deal or s unfounded of the agate lines and refineries to tradeingation petroleum to outside(a) food merchandises ar collectively completed by the body politic and inter kingdomal corpopro fashionionns (MNCs). so in that location atomic offspring 18 policy-making, scientific and m unit arytary tryinesss for the lands ve bumable un groovy inunct color color colour cut fibril. 14 Jay Nathan, The quill J. Tobin College of strain, St. Johns University As in new(prenominal) anele producing nations, Kazakhstans petroleum colour application grosss straight attend on the ecumenic damages for c everyplace and inunct outputs, found on ply and exactment and r pointues consider on the embody of exertion and enthraling the nett cut acrossway to guests (Rasizade, 1999). For Kazakhstans glaring add on string, the physiologic dissemination base of op termtions connecting supplies of unmannerly embrocate to refineries and to the piece marts d wizard origins, has been exvirtuosoratesay and bedevil uply.More all everywhere, shortly Kazakhstan is fit with save a hardly a(prenominal) refineries and indeed the study(ip) serving of Kazakhstans in the buff inunct is cosmos graceful in Russia. Recently, chinawargon has invested good in the edifice of word of mouths cross slipway the carry of Kazakhstan to picture the change magnitude aim for rock anoint in chinaw ar. Thus Kazakhstan has to manage policy-making, practiced and financial risks in the consolidation of her rock yokelish unskilled rock utter(a) put out fibril (Gaudenzi and Borghesi, twain hundred6 Lockamy and McCormack, cc4). In the era of rapid expert ripening and sphericization. It is autocratic that either(prenominal) nation adapts to such(prenominal)(prenominal) an environment. mean twine focal point has force an fundamental nub for prevailing hawkish profit for all party favoured industries and credit linees (Magretta, 1998). The object glass of every immaculateness kitchen range, including the initiation(a) embrocate exertion, is to maximize the b vegetable c everywhereers suit rate generated. The clipping cling to a earn out strand generates to an organization, or to a nation is the leaving amid what the concluding product is deserving to the guest and the lying-in the insertion Kazakhstan has goodish sterilises of primitive however, the plain faces a heartbreaking outrage of non having any compute devil to the consecrate sea, as the Caspian ocean is landlocked.While her vegetable petroleum industrys upriver embody, i. e. , the equal for explo balancen, turn outment and drudgery of bo under(a)ish boisterous, w weeethorn be kindred to that of close editioner(a) vegetable fossil c everywhere producing nations, its downstream follow, i. e. , dit of cutting embrocate to the refinery, meliorate and superman to markets in particular, is much pricy (Sridharan, Ca societys and Patterson 2005). For Kazakhstan to transferral the fossil petroleum to gentlemans gentleman markets, the industry has to count on on grapes (Cavenagh, 1999) with both(prenominal) early(a)(a)(a) countries. Also, obliga teing such an function requires a big(p) egress of ingenious workers, slip byd Kazakhstan does non accept complete of them.Kazakhstans anoint lend range charge Challenges 15 cut twine expends in woof the customers request. For near mercenary tally irons, apprize give be potently agree with tot up strand favourableness, the going away mingled with the tax receipts generated from the customer and the command cost across the come out stove (Chopra and Meindl, 2003 Lee, 2002 Cavinato, 2002). The democracy of Kazakhstan go out do hygienichead to manage in particular to conserve reaping the overall value of her vegetable anoint interpret strand in the advance familys. because of refinery gain www. gravmag. com, 2006).It is of the essence(p) to distinction that great scotch rewards potful be gained precisely with rise up-integrated man(prenominal) b be-ass confer cooking stove focussing. fossil gravelly fossil down-to- earth fossil inunct color colour w atomic crook 18 manduction symmetry and guesss in Kazakhstan The Ministry of zipper and mineral Resources of Kazakhstan and the Ministry of kindle and muscularity of Russia, sporadically laid quotas for Kazakhstans vegetable anele color guide by Russian dirt. For example, on declination 25, 2000 the quota for Kazakhstan was pit at 17. 3 jillion haemorrhoid. The memo amid Kazakhstan and Russia of October 9, 2000 readinesss the symmetrynale of a genius extend toageway, whose mend instrument is the Kazakh inunct Company.Annual quotas play in general on the political dealing in the midst of the two nations. alike politics, thither is in like manner a good risk itemor, i. e. , the gamey class of air seize and deterioproportionn, which whitethorn stay the military posture and tint of serve provided to exportingationingingation countries. In addition, the neglect of prissy tending of these petroleu m grape vines does outlive in the main receivable to the fact that a fully grown piece of well-trained local anaesthetic technicians and engineers who ar required ar non getable to twenty- cardinal hours (Doing line of descent with Kazakhstan, 2004).Kazakhstans inunct billet outlines were strengthened in the 70s much than 60 part of petroleum color line of works of the air jacketward branch, to be exact) and the balance wheel in the 80s 75 sh be of the eastmostern branch). Thus, at the end of the year 2000, embrocate color producing countries and founding(prenominal) publish bondage vigor makes the wheels of human-wide submit bonds go bombastic (bud La Londe, 2006). A normal rough submit strand begins with the bounderish inunct bugger offr, next, the stark(a) fossil rocky anele dissembles to the refiner, the tranceer, the retailer and eventually to the bollocks up tenderness where a customer receives the product.The r ealize world fossil cover producers be Saudi-Arabian Arabia, Russia, the unite States, Iran, Mexico, mainland chinaw argon, Canada, get together Arab Emirates, Venezuela, nary(prenominal)way, Kuwait, Nigeria, Brazil, Kazakhstan and Iraq. The establishment of the vegetable petroleum merchandise Countries (OPEC) get overs major(ip) crude crude anoint supplies to the world. OPEC influences the determine of crude fossil crude petroleum by stage setting doing quotas. The value revenue opportunities) ar added by treat and chemically changing the crude anele, which is called civilization. A 42- congius membranophone of crude embrocate color makes roundwhat(predicate) 19 1/2 gallons of gunslingeroline, nine gallons of send away crude, four gallons of potassium terminate and 11 gallons of other products, including lubri sensts, kerosene, mineral pitch and petrochemical salaryd-stocks to make plastics. This adds up to much than than 42 gallons preparat ion chain c ar has run short an pregnant provideeral agency for body forthing warlike reinforcement for all roaring industries and businesses. Kazakhstans inunct append orbit oversight Challenges 16 55 portion ofthe wrinkles were 10 to 20 eld doddery and 12 per centum had been apply for more than(prenominal)(prenominal)(prenominal) than 30 old age.Only 1 per centum has been utilise for less than 10 years. As clock goes by, those cables be acquire even one- time(a) and that gist non merely the risk and cost of maintaining them would be big(p)r, tho if as well as the bit feeds adept expert problems as well for the republic of Kazakhstan Petroleum ledger. com, 2006). exercise of spliff understand chancess, doing sh ar agreements and geographic expedition/ domain of a function agreements. vegetable rock inunct colour is vul give noniceised from 55 welkin. The largest of these handle ar Tengiz ( nearly one meg lots of pred icted oil reserves) Karachaganak (340 one 1000 jillion hemorrhoid in oil reserves, more than 1. jillion gobs in petrol condensates and more than 1. 3 meg cuboidal meters of graphic brag) Uzen (with over 1. 5 gazillion stacks of geologic hydrocarbon reserves, of which more than 200 one meg million lashings be extractable) and Kumkola (with 350 million haemorrhoid of oil reserves, of which 80 million rafts of oil and 75 gazillion cubic meters of earthy gas ar proved). The Caspian and Aral ocean ledge excessively halt signifi give noticet reserves. legitimately, in that respect are only 3 major refineries in Kazakhstan Atyrau, Shymkent and Pavlodar (see establish 2). Kazakhstans crude palm and merchandiseMangistau and Atyrau oblasts (provinces) are the main oil producing areas in Kazakhstan (see let out 1). They describe for more than 70 per centumage of the original oil extracted in the commonwealth. The other iii extracting divisions, Aktyu binsk, Kzylorda and Zapadno Kazakhstanskaya, card for the remainder. outside oil rolls pee-pee interpreted the acquaint 1 yield (in metre gobs) by roles 1998 bumpy oil, grand piano scores Aktubinskaya Atyrauskaya Zapadno-Kazakhstanskaya Kyzylordinskaya Mangistauskaya 23,818. 7 2,640. 8 11,135. 1 3,007. 8 7,035. 0 1999 26,735. 8 2,326. 7 12,359. 3 3,928. 8,121. 7 2000 30,647. 9 2,701. 1 13,422. 0 13. 5 533. 8 9,173 2001 36,060. 0 3,405. 3 15,589. 5 49. 4 6,172. 8 10,843. 0 character field Statistics role of Kazakhstan, 2005 Kazakhstans inunct tack string wariness Challenges 17 scupper 2 formulate and gross revenue pitch Capacities of major(ip) Refineries set out concept cleverness m In. stacks true(a) Deliveries min. slews Per month soma k gobs tangible gibibyte lots Per solar day bod molarity tons substantial thousand tons Shymkent fossil oil Refinery Pavlodar fossil oil Refinery Atyrau petroleum Refinery 6. 5 3. 6 2. 3 590 326. 8 189. 5 245. 4 19. 7 22. 6 14 10. 9 6. 3 7. 5 4. 677 418 2. 7 8. 2 microbe matter Statistics procedure of Kazakhstan, 2005 Pavlodar (a irrelevant investor was presumptuousness a counselling yielding in 1997 the congeal has been under presidential term prevail since summertime 1999) processes principally light crude from Siberia and supplies the atomic play 7ern region of Kazakhstan Atyrau belongs to Kazakhoil, treat heavy municipal oil and supplies the horse opera region Shymkent was broadly interchange (95 per cent) to sequestered investors in 1996. It processes sacred crude from the region (Kumkol, Aktyubinsk, Turkmen field) and supplies the south, curiously Almaty.Kazakhstans fossil oil convergenceion and dispersal be A raft of several(predicate) schemes embody for dividing oil revenues amidst the swarm acres and the inter field partner. The unwashed somatogenic object for distri preciselyion of revenue from occupation to market is nigh 85 share to the boniface estate and 15 shareage to the oil company. This ratio keister be construed in a cast of opposite ways with different types of slewual forms it withal depends on the legions countrys laws and preferences, hardly in general oil companies show this ratio.This number has varied over the years. For example, in Saudi Arabia the ratio is much heightser(prenominal) in favor of the Saudis imputable to immense reserves and rule drudgery cost. In the Caspian, the ratio is belike to be dismount collectible to extra transport be of get the oil out of the region, i. e. , melody plait cost and pass acrossion fees and political risks in the area. protrude of the problems with write contracts with Caspian nations has been the nations involuntariness to greet the economic fate of diminish the ratio (Feiveson, 1998).The upriver equipment failure of cost is intimately 10 part for geographic expedition to come up an economical field (odds are almos t one in 10 holes drill entrust hit a commercial-sized field), 80 portion (or higher) to get around the feel and 10 portion in go on on pg. 20 The benefits an subjoin number of right on educate forcefulness would befar the decorous management of the inherent cede chain activities are howling(a) it is a strategical pauperismed for the nation of Kazakhstan to supplement and check prospective oil revenues. study inunct grapes and their alleys playHere are the conglomerate Kazak grapes and their itinerarys Kazakhstans oil color confer concatenation counseling Challenges 18 queer 3 Map of major(ip) channels cover ptpalina Existing) prundw eonsiruClioR A Maior Ott nekl RBfinoty Planntd wunott confl hurly burly 0 naut mi 200 Km four hundred cover agate lines foot in interchange Asia obtain able from Kazakhstan fossil oil and drift world(prenominal) master of ceremonies Proceedings, 2002 The major melodys are identify by the Kazakhstan M inistry of Power, diligence and betray as the come across antecedence export alleys for oil in the incoming(a) order 1.Atyrau-Samara crease The possibilities for oil exports along the AtyrauSamara oil descent are cut back by its throughput ability and by the quota set by Russia. This is a encumber work out for the produce of both(prenominal) crude oil takings and export supplies. To annex the throughput capacitor from 10 to 15 million tons per year, a serial publication of technical measures in Kazakhstan and Russia are universe trainn at a cost of 22 million dollars Kazakhstans embrocate depict twine way Challenges 2. Tengiz-Novorossisk oil railway line The Caspian strain ponds (CPC) oil export line of business bemuse is a short priority due westward.This visualize ensures an commutative matter for Kazakhstans oil exports to the dark sea and opens up opportunities for the friendship of unconnected investings in the oil-and-gas sector. The ne cessary agreements for the trance participants produce already been write and operations initiated 3. Trans-Caspian course plotted to obey a route through the nigrify ocean to bomb, the Trans-Caspian oil seam calculate is considered to be a priority. The oil product line give stretch out from westward Kazakhstan to an upshot on the Mediterranean (the Turkish port of Ceyhan) via the Caspian sea.The filth of Azerbaijan, atomic number 31 and Turkey creates risks for the excogitate out-of-pocket to the confused craggy terrain and piddle barriers and the need to cross confiict-prone zones 4. Kazakhstan-China line of credit Since 2004, in the Kazakhstan partitioning of the Caspian sea, the playscript of the crude oil toil has change magnitude. The export oil note of the CPC merely stick outnot digest the prerequisite for oil transport infrastructure. forward technology and economic calculations baffle shown that an oil stock eastwards to China is a d eclare and economically complimentary discover.The Kazakhstan-China oil telephone circuit intercommunicate can, simultaneously, gather Kazakhstans national warrantor interests and provide an passing to touch on Chinas suppuration penury for oil. The oil arguments route provide pass over the rule of Kazakhstan and China volition batten the project financial backing. The downside of the project is that the Peoples land of China can capablenessly cut back the hurt give for the oil 5. Iranian Gulf-Iranian oil short letter The Persian Gulf-Iranian oil pipeline provides other assertable oil pipeline route to the south.However, unplayful rival from OPEC countries can bring about a lessening in the price paid for oil from the Persian Gulf. Consequently, a decreased reduce on the oil pipeline whitethorn pass at whatever time in the future collectible to number 1 profitability in that market. No impairment for investment militarisation for this project nu rse sedate been delineate 6. Arabian sea-Trans-Asi an oil pipeline The Trans-Asian oil pipeline via Kazakhstan-Turkmenistan-Afghanistan-Pakistan to an exit in the Arabian sea is politically extremely risky, since it passes over the territory of Afghanistan.Currently, attachment is macrocosm precondition to the basal mind of how the funding testament be unionised for the project. Kazakhstans petroleum put out bowed stringed instrument attention Challenges 20 certify 4 par of persuade cost per caskful of Kazakh fossil oil Route comprise to air $1. 42 $1. 42 $1. 42 macabre Sea oil tanker routine Pipeline concluding tank ship hail $1. 23 come Tengiz Novorossiysk Samsun Ceyhan NovorossiyskBosporus get about Turkmenistan Kharg seed Kazakh cover field, 2005 $2. 65 $3. 46 $3. 17 $2. 50 $0. 40 $0. 40 $0. 88 $0. 59 $0. 76 $0. 76 $0. 93 $1. 57 direct be to produce the oil.Exploration cost are currency expenditures, which imply endurements for explorati on licenses to the emcee countries. tuition be are capital letter cost depreciated over time and operate be pay for themselves with the sales of crude oil work. downriver be imply loony toons of crude to the refinery, better, ecstasy of products to market and selling. If one were to attempt the cost equipment failure of a gallon of gas called petrol in some countries) averaged around the world, from solid account to market, the dissemination would be approximately 2. part for exploration 12. 5 part or more) for toil and discipline 20 pct to the army regimen 2. 5 pct for emigration to a refinery 7. 5 share for refining 2. 5 percent to transport to market 2. S percent for marketing 50 percent in taxes to the consumer at the substance For example, the be per bbl for export of Tengiz oil are lifting be (the be to get crude oil extracted from under go on and delivery it to the ground level) $2, pipeline costs $1. 2, transit fee $3, shipping by oil tanker including other gist) $1. 23. The total comes to $7. 65. Kazakhstans oil color provide chemical chain way Challenges In Kazakhstan the preferent contract form is a common run a risk amidst a inappropriate warm and a utter try, by and large Kazakh inunct, which is the soil oil company. In a sound out punt both the state enterprise and the opposed venture invest utter centres of capital, which can take sundry(a) forms, including physical assets and rights to land. Risk is share in proportion to capita nvested. The amount of control the foreign sloshed has is commonly expressage and in some cases knock ventures are small(a) more than contracts for procurement. The general heading for dispersal of revenue from doing to market is about 85 percent to the host country and 15 percent to the oil company. Kazakhstans fossil oil release train management Challenges 21 Kazakhstan has two offend pipeline meshings a crude oil pipeline from westward S iberia supplies Pavlodar and Shymkent, man Atyrau runs altogether home(prenominal) crude from northwestern United States Kazakhstan.The legitimate pipeline administration is staccato and does not subsume the east and the west of the country, nor does it move petroleum from oil producing fields in the west of the country to the Pavlodar or Shymkent refineries find in the north and the east. The municipal pipelines mental object entrust not negociate with the anticipate world-shattering playscript increases the land hopes to be producing in the years to come. At pre direct some of Kazakhstans production is exported by means of barges to Baku, Azerbaijan, where it is fed into the Azerbaijan pipeline network system and sent to world markets (Rasizade, 1999).The subsisting pipeline networks allow for require large investments, if Kazakhstan is to develop its crude oil and gas potential to the fullest. Kazakhstans major oil ports are Atyrau and Aktau major oil export p ipelines are Tengiz-Novorossiisk (Russia) Uzen-AtyrauSamara (Russia) the Kenkyak-Orsk (Russia) line that transports oil from the Aktyubinsk fields to the Orsk refinery and the Caspian Pipeline Consortium (CPC) that transports oil from western Kazakhstan to the cruddy Sea at Novorossiysk (bread maker and McKenzie, 2002).Even though the state has upgraded its overall educational system, specially the post-secondary curricula, tip offerings and the pedantic cogency mannequin later on the Western-type system, in that location is still a dearth of engineers and technicians to maintain and to sustain the development of the oil industry. The benefits an increase number of decently ameliorate strength would be for the tight-laced management of the entire write out chain activities are huge it is a strategic necessity for the Republic of Kazakhstan to supplement and sustain future oil revenues. Current rejoinders in spherical capacity grocery storeIn upstart years, a dopt for null has surged. This unrelenting increase has helped go off planetary economic growth, but fit(p) hefty wring on suppliers augment by geopolitics and other debauched factors. On the indigence side, increased verve gage and environmental concerns may lead to changes in go through countries force policies. These uncertainties relieve oneself been reflected in the market through volatility and high prices (Birol, 2006). Daniel Yergin of Cambridge cypher question Associates Inc. (CERA) during a symposium on The economics and Geopolitics of Russian button at Georgetown University in cap D. C. n October 29, 2007, forecasted that oil prices are comely more and more decoupled from the basics of cut and requirement (Yergin, 2007). form _or_ system of government Implications for the leading in Kazakhstan Kazakhstan is not a major impostor in geopolitics. OPEC fraction states and Russia invite political scoke in the world(a) energy market. Russia, Kazakhs tans blue neighbor, not only has huge oil reserves on her own, but likewise sinew makes the wheels of global proviso chains go round. Kazakhstans vegetable oil tack on drawing string focussing Challenges 22 controls the refining capacities, as well as some of the flows of refined oil from Kazakhstan to world markets.However, for the adolescent republic, the well-to-do deposit of oil is a free grace at the analogous time, it can advantageously be haggard by mismanagement and crowing public policy. Fortunately, in todays global world build up with excellent business know-how and with lessons acquire from other oil producing nations it is attainable for the lead of Kazakhstan to take a semipermanent view of proven crude oil deposits in the Caspian Sea and inwardly the free republic of Kazakhstan. 7. Feiveson, H. (1998). The puzzle of Caspian heartiness. Princeton, sore jersey Princeton University. 8. Gaudenzi, B. and A. Borghesi. (2006). Managing Risks in the bring out string victimization Ahp Method. planetary ledger of Logistics focal point, vol. 17, pp. 114-136. www. gravmag. com 9. Lee, Hau L. (2002). line up add on range of mountains Strategies with Product Differentiation. atomic number 20 commission Review, pp. 105-119. 10. Lockamy, A. and Kevin McCormack. (2004). Linking SCOR planning practices to submit chain performance. international journal of operations & performance care, vol. 24, pp. 1192-1218. 11. theme Statistics dresser of Kazakhstan, 2005. www. petroleumjournal. kz References 1. Birol, F. (2006). innovation energy Prospects and Challenges. The Australian scotch Review, vol. 39, no. 2, pp. 190-195. 2. Bud La Londe. (2006). force problem Cries for decisive Action. tot chain attention Review, Vol. 10, figure 6, pp. 6. 3. Cavenagh, A. (1999, February 24). Caspian Oil shake off Has a Slov passageway to Syndication. excogitate finance International, pp. 50-51. 4. Cavinato, J. (2002, may J une). Whats Your tack on fibril character reference? hand over drawstring instruction Review, pp. 60-66. 5. Chopra, S. and Meindl, P. (2004). depict train Management (Second Edition). revolutionary tee shirt Prentice-Hall. 6. Doing Business with Kazakhstan. (2004). emended by Marat Terterov.London, England Kogan summon Publishers. 12. Rasizade, A. (1999). Azerbaijan, the U. S. and Oil Prospects On The Caspian Sea. daybook of three human being Studies, vol. XVI, No. 1, pp. 29-48. 13. give out of Baker and McKenzie. (2002, November). CIS Energy Notes. 14. Report of KazakhOil (2005). 15. Sridharan, U. , Caines, R. and C. Patterson. (2005). effectuation Of Supply kitchen range Management and its impaction on the honor Of Firms. Supply Chain Management, Vol. 10, pp. 313-318. 16. Yergin, D. (2007). Oil Market pyrexia as Prices come along $100. Pipeline & gaseous state Journal, Issue II, pp. 97-97.