Make Kazakhstan a gas country – Chairman of QazaqGaz Management Board Sanzhar Zharkeshov

Kazakhstan can become a leading gas country, Sanzhar Zharkeshov, the Chairman of the Management Board of QazaqGaz National Company, claimed in an exclusive interview with New Time TV show host Dauren Isssagulov. According to him, this is facilitated by the vast reserves of energy resources within the country's territory. The estimated volume of gas in Kazakhstan's subsoil is 62 trillion cubic meters, of which 4 trillion cubic meters of reserves are approved and recoverable. "If we can convert these 62 trillion into proven reserves, we will be able to enter the world’s top 10 gas countries", said Zharkeshov. Watch our exclusive interview with Sanzhar Zharkeshov for more details about the goals and tasks of domestic gas industry.

Thank you very much for joining us. It's a pleasure, actually, to have you here. Let me start from this question. Let us talk first about the importance of the maintenance of the energy security in Kazakhstan. It is planned by the year of 2030 that gas sector will become the driving force of the Kazakh economy. I would like to ask you about the new strategy of gas development that you proposed last year. Could you please tell us more about it?

Thank you for the invitation, and thank you for the interest to the gas industry. Indeed, gas industry is becoming one of the driving forces of the national economy development. And, as you know, by 2029, the new task is to double the GDP. And, one of the tasks is to rejuvenate gas industry. National company, QazaqGaz, was created back in 1992, as you know, and then it was merged with QazaqOil and then became part of KMG. In the end of 2021, QazaqGaz became a standalone national gas company, and that wasn't by accident. This was done deliberately by our president, by his vision. And it's important to realize that, Kazakhstan has always been an oil country. And in the global arena, nobody knew us as a gas country. Although we do have a lot of oil reserves and resources, we also have lots of gas resources.

And if you think about the global energy balance change, because of decarbonization, because of energy security issues, because of some of the geopolitical events happening in the world, gas is becoming a solution. Gas is a transit tool between dirty and clean. So, we're moving away from dirty sources of energy to cleaner and gas has to be the bridge between the two. And it is the bridge, we see in many countries globally. I can see that we can realize this potential, to become a gas country. We possess about 62 trillion cubic meters of prognosed gas resources. These are undiscovered resources. About 3.84 trillion cubic meters of proven gas reserves. This is per the official report of the complex, comprehensive study of all our sedimentary basins done by our famous geologists in Kazakhstan.

In 2022, QazaqGaz developed a new strategy to basically realize this whole potential of the gas industry in Kazakhstan, make Kazakhstan a gas country, not only oil country. And also provide these resources, trade gas, methane, basically, to our citizen, to our national economy, for exports and transit as well. If you think about the global scale in the energy balance at the moment roughly 70% of our electricity generation comes from coal.

As per Paris agreement commitments we have to significantly lower it by 2030 according to the Ministry of Energy's report. We have to achieve about 30% of that electricity generation that should come from gas. That's a huge change, huge shift in the energy balance and we have to be ready for that.

QazaqGaz signed an agreement with, foreign companies for the development of the Pridorozhnoye field in the Turkistan region. You’ve already mentioned that one of the main tasks of QazaqGaz would be increasing the gas resource base in the country. So, my question is, how can this task and cooperation with foreign companies in this regard be helpful?

This is an important question. In the exploration and production business, it's important to use the best practices from the world. Usually, there's a system called carry financing, which is, basically an investor comes into a country, takes all the risks themselves, and doesn't put any financial or geological risks on the national company. They take it on themselves.

Then, if there's a find, geological and technical discovery and commercial, then they're going to share the product as a production share and remain 50-50. This is exactly what we're trying to do. We have really good assets. Over the last 2 years we've developed quite a robust and interesting exploration portfolio. We reserved under Kazakhstan's name in the state geological committee about 9 exploration licenses. They have the highest geological chance of success, technical and commercial chance of success, and foreign investors know that. They know that the material is there. Structure is there. They are interested.

They are ready to invest and take the risks on themselves. QazaqGaz, as a national company, gets a lot of benefit out of this model. Then after that, its development starts. For Pridorozhnoye, particularly, we got interest from Chinese companies, from Turkish companies, and also from Kazakh companies. They really see the changes in the gas industry that's just becoming quite attractive economically, because we are running the deregulation form of the Ministry of Energy, incentives, programs, improve model contracts that is done thanks to the government. Now all of a sudden, all these gas assets have become quite interesting. So Pridorozhnoye, I'm sure, will be a success and, we are in the process of selecting the right partner right now.

In 2023, Russia, Kazakhstan, and Uzbekistan signed an agreement on transportation of Russian gas through the territory of Kazakhstan to Uzbekistan. In this regard, my question is how do you see the prospects of this project? Can we forecast scales of the transportation?

Absolutely. You know, Kazakhstan is a landlocked country, but has very important neighbors, has a transit potential. The country's leadership says we have to maximize its capacity and potential so that we can use, its territory for the benefits of its people. So, this particular project is the case in point. So, the agreement between Russia and Uzbekistan on purchasing gas was a great achievement, I think.

Since Uzbekistan needs gas, Russia has gas and in between the two countries Kazakhstan can be a transit country. It has already become. So, three presidents kicked off this project last October, and this was a great win for QazaqGaz. And because in the record time, we were able to very quickly repair and reconstruct our gas transportation system so that we can ensure that our gas pipeline system is ready to make the transit. This was phase 1. We are getting quite a significant revenue from the transit, and we're using that to develop our national economy. We're reinvesting it into our exploration and production assets, boosting and modernizing our gas transportation system and some of the downstream projects.

And phase 2 will be, to answer your question, another boost and a significant one. And that means there's going to be more revenue for Kazakhstan. At the moment I can't exactly state the volume because it's a negotiation process between the buyer and the seller.

And last but not least, may I ask you what is your vision of the future of international corporation? What potential KPI do you set for QazaqGaz or maybe for the whole industry in the next 5 years?

That's a quite an important question, I would say. As I said, we have a robust strategy that is working, that is being implemented, that is giving results. So, for me, for the next 5 years, we need to ensure that, first of all, the gas industry becomes economically viable. So, the social sphere, deregulation reform that is being implemented by the Ministry of Energy and the Ministry of National Economy has to reach its goals. So, to ensure that gas industry is economically viable and QazaqGaz plays a critical role in this. We're a 100% regulated monopoly. Secondly, as I said, we have a lot of gas, a lot of resources and reserves. We need to ensure we maximize the production out of this potential. The third, and obviously, main priority, I would say, for national company is ensuring the internal consumption in Kazakhstan.

As I said, we're going to see a doubling consumption in the next 10 to 15 years. And, we have to make sure that it's stable. We have given the delivery assurance to this consumption, the base of new businesses, citizen, their electricity generation, petrochemical projects, and international cooperation. So, we border with some important gas countries including Turkmenistan, Uzbekistan, China and Russia.

And I believe we can maximize the synergy between these countries. Across the Caspian Sea we border on Iran and Azerbaijan. These are all gas countries as well. We need to make sure that we maximize our potential and become a significant player in this region.