Kashagan oil field in Kazakhstan – October 1, 2013

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A major development in Kazakhstan has been the production of the first oil in an area called Kashagan this month.  The Kashagan field, according to the Financial Times, is one of the world’s largest and is estimated to hold as much as 35 billion barrels of oil.  A seven-member consortium, including Eni of Italy, Royal Dutch Shell, and ExxonMobil, participated in the project.  The total cost of the venture is estimated at $41.2 billion, which has earned it the tag of the world’s most expensive oil. Thanks to Kashagan coming online, Kazakhstan’s oil production is set to increase by 1 million barrels rising from 1.6 million barrels per day to 2.6 million barrels per day in 2020.  “This will catapult the Central Asian country into the top league of major non-OPEC oil producers.”  The importance of this development was evidenced by the visit of British Prime Minister David Cameron, to Kazakhstan in July to inaugurate the oil field. Both Russia, of which Kazakhstan was one of its constituent “soviet socialist republics” in the past, and China will be competing for Kazakhstan’s favors. Given China’s voracious need for energy it will be a major suitor of Kazakhstan.

 

China’s objective of increasing its oil imports from Kazakhstan was given a boost when the China National Petroleum Corporation was successful in becoming a stakeholder in Kashagan.  The importance of this event was highlighted by a visit to the region by Chinese President Xi Jinping.  Mr. Xi formalized a $5 billion deal for Kashagan, which places China also in the seven-member consortium referred to in paragraph 1 above.  According to an analysis in the New York Times, “China’s influence has eclipsed even Russia’s across the former Soviet Republics of Central Asia.”  Another important observation made by some observers is that China’s increasing role in the region has been buttressed by the United States’ waning influence, as it winds down the war in Afghanistan.  According to the New York Times, “Washington, once eager to bolster the presence of big western oil companies as a way to trim the power of Russia, has receded on that front, too.”  It was but inevitable that China’s increasing need for energy would propel it toward energy rich Central Asian countries, chief among whom is Kazakhstan.

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