Kazakhstan produces about as much natural gas as it consumes, and following maintenance at Tengiz and Karachaganak in the last couple years, the country is poised to become a net exporter in 2008. The Kazakhstan Energy Ministry estimated that production during 2007 totaled 1,037 billion cubic feet (Bcf), over 70 percent of which was produced by international consortia at the Tengiz and Karachaganak fields. Gas production increased by over 8 percent from the previous year.

In 2007, the Oil and Gas Journal revised upwards its estimate of proved natural gas reserves in Kazakhstan to 100 trillion cubic feet (Tcf), putting the country on par with Turkmenistan. Most of Kazakhstan's natural gas reserves are located in the west of the country, with roughly 25 percent of proven reserves situated in the Karachaganak field. This oil and gas condensate field reportedly has proven natural gas reserves of 48 Tcf. The consortium developing Karachaganak expects to produce 900 Bcf by 2012.

Natural gas in Kazakhstan is almost entirely "associated" gas. Several fields including Karachaganak reinject significant quantities of gas into the ground to maintain crude wellhead pressure for liquids extraction. In the long term, when the liquids are exhausted, this gas can be recovered.

The largest source of natural gas in the country is the Karachaganak natural gas and condensate field which produced 503 Bcf during 2007, up over 18 percent from the previous year. The consortium estimates that the field contains over 47 Tcf (1.35 Tcm) of natural gas reserves. Further information on the export of natural gas from this field and expansion plans are explained below.

A World Bank commissioned study conducted by the National Oceanic and Atmospheric Administration (NOAA) estimated that Kazakhstan was flaring as much as 286 Bcf (8.1 Bcm) in 2006, making it the fifth-largest flarer worldwide. Official figures are around two-thirds less, and some overstatement occurs because of the inclusion of gas venting in the figures (especially in the case of Russia). Still, the report indicates that gas flaring in Kazakhstan increased by over 170 Bcf since 1995. Since a May 2005 government order to all 34 oil producing firms to reduce oil production to levels that would avoid natural gas flaring, flaring has declined slightly. Many of the companies that produce associated gas have made pledges to develop ways to use the gas (such as for electricity generation). New environmental legislation allows the government to fine any company that carries out unauthorized natural gas flaring.

The Tengiz field, which produced 248 bcf in 2007, is one of the largest contributors to natural gas flaring in the country. In 2005, the company was forced to shut down some production and release sour gas into the atmosphere after the emergency halt of its five energy generators. After four years of planning and construction, the Sour Gas Reinjection (SGI) Project will help increase both oil and gas production from the field and will help reduce the amount of gas flaring. The project began operating in limited amounts in October 2006.

Since Kazakh natural gas is a potential competitor with Russian natural gas, several new natural gas export pipelines from the Caspian Sea region also are in development or under consideration, potentially opening up new markets for Kazakh natural gas. The two branches of the Central Asia Center (CAC) gas pipeline, the main gas export pipeline from Central Asia, meet in the southwestern Kazakh city of Beyneu before crossing into Russia at Alexandrov Gay and feeding into the Russian pipeline system. Therefore, Kazakhstan is a major transit route for gas from Turkmenistan to Russia and on to other markets across the territory of the former Soviet Union

In December 2007, CNPC pledged to invest $2.2 billion in a 1.06 Tcf (30 bcm) natural gas pipeline that would run from Turkmenistan through Uzbekistan and Kazakhstan to China. According to the construction plan, the pipeline is expected to start at Gedaim on the border of Turkmenistan and Uzbekistan and extend 1,100 miles. About 325 miles would run through Uzbekistan and the rest in Kazakhstan to reach Khorgos in China's northwestern Xinjiang region. In August, Turkmenistan and China signed a 30-year supply agreement for the gas that would fill the pipeline. CNPC has set up two entities to oversee the Turkmen upstream project and the development of a second pipeline that will cross China from the Xinjiang region to demand centers in southeast China. The total cost of the entire project is expected to be $7.31 billion. Also, Russia is planning a natural gas pipeline to China.

Kazakhstan-China Gas Pipeline Routes

Source: Kazakhstan Energy Ministry (click to enlarge)

In December 2007, Russia, Kazakhstan and Turkmenistan announced the signing of an agreement to carry Central Asian natural gas from Turkmenistan to Russia via the existing Central Asia Center gas pipeline. After the pipeline’s completion in 2012, the route will have a capacity of 2.6 Tcf (80 Bcm), up from around 2.1 Tcf (60 Bcm). The agreement stipulates that each country will be responsible for building the section of new pipeline in each of their respective territories. Russia’s agreement with the two countries was reportedly contingent on a Russian pledge to increase its buying price of Central Asian gas, but the exact price is still undetermined.

Because of Kazakhstan's divided distribution network, Karachaganak's natural gas is exported northward to Russia's Orenburg processing plant, as opposed to being delivered to Kazakh consumers in the south. Under a 15-year agreement signed during the summer of 2006, Gazprom will pay $3.96 per thousand cubic feet (mcf), or $140 per thousand cubic meters, for Kazakh gas imports while Kazakhstan will get a 50 percent stake in a new unit of the Orenburg gas processing plant just across the Russian-Kazakhstan border. Gas output from the Karachaganak field will be shipped to Orenburg for refining, with volumes expected to reach at least 530 Bcf per year. Gazprom and Kazmunaigaz will each have a 50 percent stake in KazRosGas, the joint venture which will purchase the gas and expand the Orenburg plant. Current deliveries of Karachaganak gas to the Orenburg plant, located 84 miles from the field, are estimated at 250 Bcf/y. Gazprom is reportedly expected to begin to receive gas deliveries from the field in 2012

Efforts are also underway to export Karachaganak's gas condensate and other liquids through the CPC pipeline system. The Karachaganak Integrated Organization, which is developing the field, has thus far focused its efforts primarily on extraction of the field's liquid condensate reserves. Several of the country's other oil fields, Tengiz and Kashagan for example, also contain associated natural gas (a by-product of oil extraction). See the maps section of the country brief for more geographical detail.

Kazakhstan has two separate domestic natural gas distribution networks, one in the west which services the country's producing natural gas fields, and one in the south which mainly delivers imported natural gas to the southern consuming regions. The lack of internal pipelines connecting Kazakhstan's natural gas-producing areas to the country's industrial belt (between Almaty and Shymkent) has hampered the development of natural gas resources. However, as stated above, the development of the Amangeldy gas field will help Kazakhstan's southern region cease importing Uzbek gas. Kazmunaigaz, the state oil and natural gas company, operates Kazakhstan's main natural gas pipelines.

Southern Kazakhstan receives its natural gas supplies from Uzbekistan via the Tashkent-Bishkek-Almaty pipeline. In 2008 Uzbekistan will supply a small amount of gas to Kazakhstan's southern regions, including the area around Almaty, for $100 per 1,000 cubic meters, a price unchanged from 2007. This pipeline snakes through Uzbekistan before reaching Shymkent, crosses Kyrgyzstan, and terminates in Almaty. Dependence on imported natural gas for its southern regions has at times been problematic since erratic pricing and supplies from Uzbekistan, combined with illegal tapping of the pipeline by Kyrgyzstan, have resulted in significant supply disruptions to Almaty in the middle of the heating season.