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Kazakhstan adopts anti-crisis measures

20 October 2015 16:25 (UTC+04:00)
Kazakhstan adopts anti-crisis measures

By Vusala Abbasova

Kazakhstan is preparing for the consequences of an upcoming crisis, developing a plan and providing measures in order to prevent the possible drop in the social well-being of its citizens.

During a recent meeting with Prime Minister Karim Massimov, Kazakh President Nursultan Nazarbayev announced that Kazakhstan's economy is becoming more challenging at the moment and the situation will worsen, when the real crisis arrives.

Nazarbayev noted that the coming crisis will be more severe that the one in 2007-2009.

The current unstable situation in oil prices significantly influenced exports from the energy-rich Kazakhstan, which is the second largest oil producer after Russia in the former Soviet Union. The country, producing about 1.6 million barrels a day, has lost 40 percent of its budget revenues due to falling global prices for hydrocarbons.

In addition, it is witnessing a decrease in the price of other export products, including iron ore, base metals and coal.

Meanwhile, Kazakhstan's agricultural production has slightly increased, while the engineering industry has scaled back production.

At the moment, Kazakhstan’s government is analyzing and creating an anti-crisis plan to determine the necessary measures required by presidential decree to provide people with proper living standards in times of crisis.

Nazarbayev also mentioned that the recently adopted Nurly Zhol Program enables the country to ensure employment opportunities, including those administered through retraining initiatives. As a result of the program, people will be suited to acquire new specialties at their workplaces.

The president also highlighted the need to provide support to socially vulnerable groups of the population by creating a separate program for this purpose.

The current situation will show which enterprises are genuinely effective and which are not, Nazarbayev noted.

“Troubled industrial enterprises shouldn’t expect the Government to give them a hand. I prohibit the use of money of the National Oil Fund [accumulating revenues from oil sales] to bail out troubled industrial entities," the president said.

Besides, there have been efforts to have some industrial facilities privatized with a view of ensuring more efficient management, he said.

Nazarbayev expressed doubt of a rapid improvement in the world economy, considering its current situation, which has engulfed Europe and Eastern Asia. Therefore, Kazakhstan’s people should be aware of decreased revenues in Kazakhstan-based enterprises and possible layoffs.

Global oil prices have fallen sharply over the past year, leading to significant revenue shortfalls in many energy-exporting nations.

From 2010 until mid-2014, world oil prices had been fairly stable, at around $110 a barrel. But since June 2014 prices have more than halved at below $50 per barrel.

Recently, Kazakhstan's deputy energy minister Uzakbai Karabalin claimed that Kazakhstan could cut oil output by a tenth next year if prices drop to $30 per barrel.

The minister said that if the oil price next year be at $50 per barrel, Kazakhstan would produce 79 to 80 million tons, representing little changed from this year's forecast of 80.5 million tons.

But if the price drops to $40, Kazakhstan's output would be 77 million tons and if oil were to fall to $30, production would be cut to 73 million tons, Karabalin said.

Moreover, the Organization of the Petroleum Exporting Countries recently forecasted a decrease in Kazakhstan’s oil production by 20,000 barrels per day in 2015 to average 1.62 million barrels per day.

Such preliminary forecasts were made because of lower investments in mature onshore fields such as Uzen and Emba, which are weighing on the country’s operations. Indeed, evidence suggests some smaller Kazakh producers have already shut wells due to poor economics.

Kazakhstan's fields

Kazakhstan produces oil mainly from its large Karachaganak and Tengiz fields.

The Karachaganak field is one of the world's largest fields. Its oil reserves amount to 1.2 billion tons, while natural gas reserves are estimated at 1.35 trillion cubic meters.

About 49 percent of Kazakhstan's gas and 18 percent of its oil are extracted from this field.

The Tengiz field in the west of the country is one of the deepest and largest oil fields in the world. The total estimated reserves amount to three billion tons (26 billion barrels).

Another large oil and gas field – Kashagan – is located in the north of the Caspian Sea. Oil production at Kashagan started in September 2013, but operations were suspended when a gas leak appeared in the pipeline. Oil production at Kashagan is expected by late 2016.

Kashagan is estimated to house roughly 4.8 billion metric tons of oil or about 38 billion barrels, some 10 billion of which are recoverable reserves. There are over one trillion cubic meters of natural gas at the Kashagan field.

Kazakhstan produced 80.845 million tons of oil in 2014, including gas condensate, which is 1.2 percent less than in 2013.

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