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Factbox: Kazakh leader's departure marks commodity sector transformation

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Factbox: Kazakh leader's departure marks commodity sector transformation

London — The resignation of Kazakhstan's first president Nursultan Nazarbayev marks 30 years of an energy policy that has seen Kazakhstan open up to international oil company investment and triple its oil output to nearly 2 million b/d.

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Under Nazarbayev's leadership the former Soviet satellite lured the world's largest international oil companies to develop three giant multi-billion barrel oil fields: Karachaganak, Kashagan and Tengiz. The Central Asian state has also become a major exporter of grains and metals, including being the world's largest uranium supplier.

"Most [Kazakh] policymakers appear to have a positive relationship with foreign oil companies, and understand the importance of Kazakhstan's major projects," said Paul Sheldon, chief geopolitical advisor at S&P Global Platts Analytics. Acting president Kassym-Jomart Tokayev "will likely maintain the status quo, while Nazarbayev can still influence policy through his permanent seat on the National Security Council and overall prominent position within the political structure," he added.

The following are key facts:


**Oil accounted for 54% of Kazakhstan's export revenues and 36% of tax revenues in 2017, according to the IMF.

**With the world's 12th largest proved reserves - around 30 billion barrels - oil output has more than tripled since 1991, to 1.9 million b/d. Three fields account for over two thirds of this: Kashagan - on stream since 2016 - has touched its initial target of 370,000 b/d, Tengiz produced 625,000 b/d last year and is set to reach 900,000 b/d in 2022, and Karachaganak produced around 230,000 b/d. Platts Analytics expects output to exceed 2.2 million b/d by 2025 and 2.5 million b/d by 2030. Other fields are declining; onshore state oil producer KazMunaiGaz EP reported a 2% drop in crude output in 2017 to some 250,000 b/d.

Kazakhstan oil fields and pipelines

**Exports are mainly via the CPC (Caspian Pipeline Consortium) route across southern Russia to the Black Sea port of Novorossiisk. CPC volumes hit a record 1.52 million b/d in December, with 90% coming from Kazakhstan. Kazakhstan also exports around 13 million mt/year of crude directly to China, and Russia's Transneft transports about 17 million mt/year of Kazakh crude by pipeline to Novorossisk, and the Baltic coast. Other shipments are by rail, and across the Caspian by tanker to Azerbaijan and the BTC pipeline.

**Kazakhstan is a party to production cuts by OPEC and its partners, with a seat on the producer countries' monitoring committee. This has not impeded CPC exports, although upcoming maintenance may crimp output.

**With gas reserves of around 1.9 trillion cubic meters, gas production for sale amounted to 33 Bcm last year, of which 18 Bcm was exported. Of the latter, 13 Bcm was sent to Russia and 5 Bcm to China; exports to China are expected to reach 10 Bcm this year. Kazakhstan's more important role is as the route for Turkmenistan's much larger exports to China, which amounted to nearly 32 Bcm in 2017.

**Kazakhstan is an important wheat exporter: the US Department of Agriculture forecasts Kazakh wheat production of 14 million mt in the current marketing year, ending June 30, of which 8.5 million mt will be exported. In 2017-18, exports hit a six-year record of 9 million mt, according to UkrAgroConsult. Main destinations are Uzbekistan, Tajikistan, Afghanistan, China and Italy. The region's rail companies plan to build out Afghanistan's rail network to enable shipments to Pakistan.

**Deposits of copper, iron, lead, zinc, chromites, gold, manganese and uranium have attracted global metals and mining companies. Production of crude steel totaled 4.45 million mt in 2018, according to the World Steel Association. ArcelorMittal Temirtau is the largest player in steel, and operates eight coal mines and four iron ore mines.

**Kazakhstan accounts for nearly 30% of global uranium output, through London-listed Kazatomprom, with production of 23,000 mt in 2017.

**Kazakh metals have encountered a trading backlash: according to the World Bank it faces 146 measures against its iron and steel products, 61 measures against basic iron and steel, and 58 measures against its copper, nickel, aluminum, alumina, lead, zinc and tin products.


**CPC is Kazakhstan's most profitable crude export option, enabling access to global oil prices. A light, low-sulfur crude with good petrochemical properties, CPC traded at a premium to Russia's Urals until 2017. Since then prices of the two crude grades have aligned, partly under the influence of OPEC production cuts.

**Crude shipments through the Transneft system are less profitable due to the blending of Kazakh crude with general Russian flows. Pipeline shipments to China are also seen as less profitable.

**Kazakhstan has sought to rein in its uranium production as it contends with a drop in world prices.


**The CPC pipeline, owned by a consortium of companies and the Kazakh and Russian states, has been steadily expanded to handle growing oil volumes. As a route for Kazakh supplies it has out-competed the BTC pipeline from Azerbaijan to Turkey's Mediterranean coast, the latter only carrying modest Kazakh volumes.

**Direct oil shipments to China are via one of the world's longest pipelines, the 2,200 kilometer Atasu-Alashankou route. This has capacity to handle 20 million mt/year, of which only two thirds is currently utilized.

-- Nick Coleman,

-- Diana Kinch,

-- Nadia Rodova,

-- James Colquhoun,

-- Edited by Paul Hickin,