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Oil production, gas supply and investment attraction — how energy industry of Kazakhstan developed during pandemic

Friday, 05 March 2021, 22:00:46

An expanded meeting of the Ministry of Energy on the results of 2020 and tasks for 2021 was held today. The reports were presented by the Minister of Energy Nurlan Nogayev, Chair of the Management Board of NC KazMunayGas JSC Alik Aidarbayev, Managing Director for Strategy and Development of KEGOC JSC Zhandos Nurmaganbetov, Chief Director for the Nuclear Fuel Cycle of NAC KazAtomProm JSC Mazhit Sharipov, General Director ALE KAZENERGY Bolat Akchulakov, Deputy Prime Minister Roman Sklyar.

According to Minister of Energy Nurlan Nogayev, the coronavirus pandemic has significantly affected the operation of the industry.

In connection with the spread of the COVID-19 virus, since February last year, the Ministry has been operating an Operational Headquarters to monitor the situation with CVI with the participation of interested companies. An operational report on the situation on projects is received by the Headquarters on a daily basis.

Currently, all companies have developed and approved action plans to prevent the spread of coronavirus infection and ensure preparedness in the event of a worsening epidemiological situation.

“Also, oil and gas companies have allocated about 16 billion tenge for social assistance. Thanks to the selfless work of our colleagues, the energy system of Kazakhstan has withstood the blow of the pandemic. Despite the virus, people continued to work at power plants, oil refineries, fields, providing the country with the necessary energy,” Nogayev said.

As the head of the department noted, the spread of coronavirus around the world has significantly affected the energy market. In this regard, it became necessary to amend the production figures for 2020.

The main indicators of the oil industry, which turned out to be the most vulnerable in the context of the pandemic, are as follows:

The volume of oil and condensate production at the end of 2020 amounted to 85.7 million tons (101% to the plan for 2020, IFO — 94.7%).

Taking into account the restrictions in force in January 2021 (-17%), a forecast was made according to the pessimistic scenario for production for 2021 in the amount of 83.4 million tons.

“At the same time, there is a gradual recovery of the world oil market and oil quotations. We expect to fulfill the plan — 86 million tons,” he added.

By the end of 2020, oil exports amounted to 68.5 million tons (102% to the 2020 plan, IFO — 94.9%). The plan for 2021 is 67.5 million tons.

The volume of oil refining at the end of 2020 amounted to 15.8 million tons (102% to the 2020 plan, IFO — 92.3%). The plan for 2021 is 17 million tons.

By the end of 2020, the volume of oil products production amounted to 11.5 million tons (102.9% to the 2020 plan, IFO — 90.8%). The plan for 2021 is 12.4 million tons.

Thanks to the measures taken by the Government of Kazakhstan and the OPEC+ countries as part of the reduction in oil production, by the end of 2020, the oil price increased from $18 to $50 per barrel.

The estimated profit from oil exports at these prices, taking into account the limitation of production, is conventionally $10 billion in 2020 and $14 billion in 2021.

The decrease in commercial oil reserves in the OECD storage facilities amounted to 3,214 to 3,077 million barrels.

Future expansion project implemented at Tengiz

According to Nogayev, a future expansion project worth $45.2 billion is being implemented at the Tengiz field. The project is planned to be completed in 2023, which will increase production by 12 million tons per year. Kazakhstani content in the project is 36%. Currently, the work is proceeding according to the schedule, the overall progress of the project is 81%. In general, this year the expected level of work progress will be 90%.

"According to the protocol instruction of the Head of State within the framework of the Council of Foreign Investors on the effective participation of the state in the implementation of the Kashagan project, this year it is planned to start construction of a gas processing plant based on raw materials from the Kashagan field with a capacity of 1.150 billion cubic meters of raw gas worth $860 million," the minister of energy added.

The expected effect of the implementation of this project is the production of an additional 800 million m3 of commercial gas and the creation of new jobs (for the construction period — 2,800 people, for the operation period — 600 people), as well as an increase in oil production from 8 to 10 million tons.

Preparations are also underway the concept of the full-scale development of the Kashagan field. Currently, all objects of the pilot development stage have been commissioned, the production capacity is 400 thousand barrels per day, but due to the restrictions introduced by the ministry in May 2020, the average daily production is maintained at 280 thousand barrels.

Under the Karachaganak project, investment projects are in the active phase of implementation — the removal of production restrictions on gas (LPOG) and the project of the 4th gas re-injection compressor. Their launch will make it possible to additionally produce 18.5 million tons of liquid hydrocarbons by the end of the FPSA period, the total investments amount to $1.678 billion.

Long-term negotiations on Karachaganak ended, as a result of which the International Consortium paid Kazakhstan $1.3 billion and made changes to the method of sharing the produced products , which will bring about $600 million until the end of the contract.

Also in December 2020, the final investment decision was made to implement a large investment project for the expansion of Karachaganak — PRK-1A, which is aimed at further maintaining the level of production of liquid hydrocarbons within 10-11 million tons per year, taking into account the commissioning of an additional 5th compressor sour gas re-injection. The project budget is $970 million. Completion date is 2025.

The volume of production of petroleum products (jet fuel, diesel fuel, fuel oil, gasoline) at the end of 2020 amounted to 11.5 million tons, (90.7% by 2019).

In terms of brands of fuels and lubricants, production at the end of 2020:

- gasoline — 4.48 million tons (98.5% by 2019);

- aviation kerosene — 438 thousand tons (70.1% by 2019);

- diesel fuel — 4.55 million tons (94.5% in 2019);

- fuel oil — 2.1 million tons (74.1% by 2019).

Bitumen production volume — 1.04 million tons (86.5% by 2019).

This circumstance is associated with a decrease in demand for light oil products in the domestic market, due to the introduced quarantine measures.

So, in order to prevent interruptions with goods in the domestic market, the Ministry of Energy adjusted the plan for oil refining at refineries from 17 to 15.5 million tons, and also reduced the production of diesel fuel and jet fuel, while increasing the production of bitumen, because. there was an increase in the volume of road construction.

At the same time, the ministry has taken a number of the following measures to support the industry:

- cancellation of the ban on the export of petroleum products by road outside the Republic of Kazakhstan and the countries of the Customs Union;

- exemption from payment of excise taxes for producers of excisable goods for gasoline and diesel fuel sold for export;

- introduction of a ban on the supply of gasoline, diesel and aviation fuel to the republic by rail, road and pipeline transport;

- zeroing of the rates of export customs duties on oil products, including gasoline, diesel fuel and fuel oil.

Since July 2019, after the ban was lifted, the export of gasoline to the countries of Europe and Central Asia began. In 2020, the volume of exports for gasoline amounted to about 500 thousand tons, and for diesel fuel 180 thousand tons.

At present, the domestic market is fully provided with domestic oil products.

As part of the President's Address, an instruction was given to restore order and improve exchange trading in the field of oil products and electricity, as well as develop competition policy.

So, since March 2021 it is planned to sell gasoline and bitumen through commodity exchanges, while the volume of sales will be determined in accordance with the monthly Supply Plans approved by the Ministry under the Law of the Republic of Kazakhstan "On State Regulation of the Production and Turnover of Certain Types of Oil Products.’’ It is planned to start selling diesel fuel and kerosene through commodity exchanges from the third quarter of 2021.

Also, within the framework of the protocol instruction of the Head of State dated Sep. 5, 2019 "On the Development of Oil and Gas Industry of the Republic of Kazakhstan", this year it is planned to complete the construction of the reverse of the Kenkiyak-Atyrau oil pipeline with a capacity of up to 6 million tons per year. The implementation of this project will ensure a reliable load of the Pavlodar and Shymkent oil refineries with West Kazakhstan oil and reduce the load on oil supplies to the domestic market for oil producing companies of the Kyzylorda region, as well as an imbalance between supplies to the domestic market and exports.

In accordance with Art. 144 of the Code of the Republic of Kazakhstan "On Subsoil and Subsoil Use", as well as paragraph 1 of the Action Plan for the Implementation of the State Program Digital Kazakhstan, it is planned to implement an information system for accounting for crude oil and gas condensate.

To date, the following work has been done:

  • by a joint order with the Ministry of Digital Development, Innovation and Aerospace Industry, the oil accounting information system has been launched in a pilot mode;
  • general scheme of equipping with metering devices was developed and approved;
  • to date, 3 out of 4 oil transportation organizations are already connected to the system: (KazTransOil JSC, Munaitas LLP, Kazakhstan-China Pipeline LLP. The 4th organization, Caspian Pipeline Consortium LLP, is in the process of being connected).

In general, this year it is planned to connect organizations that provide 60% of the total oil production in Kazakhstan.

“One of the priority areas of the ministry's activities is the development of the gas industry and gasification. In 2020, the volume of gas production amounted to 55.1 billion cubic meters of gas (100% to the plan for 2020, IFO-97.7%). The plan for 2021 is 55.8 billion cubic meters of gas. Liquefied gas production at the end of 2020 amounted to 3.2 million tons (100% by 2019, the decline in production is associated with a decrease in hydrocarbon production.). The plan for 2021 is 3.2 million tons,” Nogayev said.

Within the framework of the President's Address to the people of Kazakhstan "Kazakhstan in a New Reality: Time for Action,’’ by the end of 2021, a complete transition of the sale of liquefied petroleum gas through electronic trading platforms will be carried out, which will give transparency and competitiveness to this industry, as well as in order to reduce administrative barriers for business will be canceled Institute for Accreditation of Gas Network Organizations.

Also, by the end of 2020, the production of marketable gas amounted to 30.5 bcm (100% to the plan and 92.1% by 2019). The plan for 2021 is 30.9 bcm.

The volume of gas exports in 2020 amounted to 10.7 billion m3 (101% of the 2020 plan). The plan for 2021 is 10.7 billion m3.

In 2020, 38.4 billion tenge was allocated for the implementation of 51 gas supply projects.

As a result of the completion of 19 projects worth 13.8 billion tenge, the country's gas supply level was 53.07% (51.47% in 2019) or 9.84 million people have access to gas.

In accordance with the instructions of the Head of State, an analysis was carried out and 1,227 objects were identified that were not transferred to the balance of operating organizations, with a value of more than 302 billion tenge. To date, 318 objects have been transferred for a total amount of 74.5 billion tenge.

In March 2020, the Law of the Republic of Kazakhstan on the ratification of the Agreement between the Governments of the Republic of Kazakhstan and the Russian Federation on gas supply to the Baikonur complex was adopted. This Agreement enabled the population of the city of Baikonur to reduce the cost of paying for utility services.

The share of gas supply of the population is projected at 53.7% by the end of 2021, or 119 thousand people will have access to gas.

Also in 2021, the Comprehensive Plan for the Development of the Gas Industry will be approved and the General Scheme for Gasification of the Republic of Kazakhstan will be updated, which will make it possible to efficiently use the country's energy resources and rationally distribute budgetary funds during the construction of gas distribution networks.

Also, the National Operator Kaztransgaz JSC is working on the digitization of engineering networks, so today:

- about 2 million subscribers of the country have been digitized;

- 19 thousand km of the main part of the gas pipeline;

- 3D models of objects of the main gas pipeline were created;

- gas distribution system of the city of Kostanay was digitized in a pilot mode.

According to the minister, in 2021 it is planned to:

- digitize 47 thousand km of gas distribution networks in cities and regions;

- digitize and update spatial data.

Currently, in Kazakhstan, work is underway to reorient the oil and gas sector from a raw material orientation to the production of products with high added value — the development of a high value added oil and gas chemical industry.

In connection with the commissioning of new enterprises and the increase in production volumes of the existing plants for the production of aromatic hydrocarbons, oils and polypropylene, an increase in the production of petrochemical products is noted every year.

Thus, the volume of products manufactured in 2020 amounted to 360 thousand tons, which is 4 times more than in 2016. The share of exported products was 80%.

Currently, there are 5 factories in the country for the production of lubricants, polypropylene, methyl tert-butyl ether, benzene and paraxylene with a total capacity of about 870 thousand tons.

At the same time, their operating capacity is only 41% or 360 thousand tons.

Production plan of oil and gas chemical products for 2021 is 400 thousand tons.

In addition, the Head of State at an expanded meeting of the Government of the Republic of Kazakhstan set the task to take measures to accelerate the ongoing oil and gas chemical production, as well as create attractive conditions for potential investors.

The solution to this problem is proposed as follows:

In the current year, it is planned to develop a National Project for the Development of Petroleum Chemistry until 2025, which will allow to develop the industry point-wise with an emphasis on solving problematic issues, in particular:

  • providing petrochemical projects with raw materials;
  • creation of a cluster of petrochemicals;
  • development of further redistribution.

Also, as part of the instructions of the Council of Foreign Investors, the development of a separate agreement between the Government and the investor is being worked out, taking into account his needs in the implementation of the petrochemical project.

These measures will allow to complete the construction of 5 plants by 2025:

- a polypropylene plant with a capacity of 500 thousand tons / year (Atyrau region);

- a plant for the production of industrial gases with a capacity of 57 million cubic meters of nitrogen and 34 million cubic meters of dry compressed air (Atyrau region);

- a plant for the production of polypropylene with a capacity of 80 thousand tons / year and octane-enhancing additives for gasoline with a capacity of 60 thousand tons / year on the basis of raw materials from the Shymkent petrochemical plant (Shymkent).

- plant for the production of polyethylene terephthalate with a capacity of 430 thousand tons / year (Atyrau region);

- a plant for the production of methanol (82 thousand tons) and glycol (100 thousand tons) with a capacity of 182 thousand tons (Uralsk).

Thus, the expected effect by 2025 implies an increase in production by 9 times, amounting to 2.0 million tons of petrochemical products, the volume of investments in the country's economy will amount to about $3.9 billion.

“Thus, the production of basic petrochemical products will serve as a solid basis for development deep processing in the oil and gas sector, which is in line with our strategy to diversify the resource economy and strive for technological development,” he said.

To date, 276 contracts for subsoil use have been concluded, including 254 contracts for hydrocarbons and 22 contracts for uranium. In 2020, 11 contracts were signed.

The volume of investments in exploration work amounted to 100 billion tenge.

At the end of 2020, R&D funding by subsoil users amounted to 10.2 billion tenge.

Nurlan Nogayev also reported on the practice of holding auctions to obtain the right to subsoil use in electronic format.

“The ministry adopted all the necessary regulatory legal acts and carried out technical work to launch the system. The system was launched on Sep. 1, 2020, and already on Dec. 23, 2020, the first online auction was held to provide exploration and production rights in the amount of 61 billion tenge. 10 oil and gas subsoil plots with a total starting amount of a signature bonus of 400 million tenge were put up for an electronic auction,” the minister noted.

The results of the auctions were positive. Bidding was held in 8 areas, where the total total amount of signature bonuses amounted to 1.5 billion tenge, the total area of ​​areas for the development and production of hydrocarbons was 22 thousand square km.

Based on the results of the first electronic auctions, proposals for their improvement were developed, and already this year these proposals will be sent for consideration to higher authorities.

Nurlan Nogayev also added that a second auction will be held this year. The subsoil use right for 15 oil and gas subsoil plots has already been put up for it, the auction is scheduled for April 23.

At the end of 2020, the total volume of purchases of goods, works and services of subsoil users of hydrocarbon raw materials and uranium mining amounted to about 5.4 trillion tenge. At the same time, the share of local content in these purchases was 46%.

As part of state support for local entrepreneurs during a pandemic, amendments were made to the Rules for the acquisition by subsoil users and their contractors of GSS used in exploration or production of hydrocarbons and uranium mining, allowing subsoil users to purchase goods of Kazakhstan origin from a single source without holding competitive procedures.

Currently, the Ministry of Energy of the Republic of Kazakhstan is implementing two initiatives that can increase the share of local content in the oil and gas sector, the first is the creation of a Direct Investment Fund for the development of local content, incl. to promote domestic IT developments, the second is the creation of an international center for the development of oil and gas engineering and service.

It is expected that within 10 years, the positive effect of the Fund's activities on the GDP of the Republic of Kazakhstan will be about $642 million, and the International Center will help eliminate the existing gaps for local producers / service companies in the production and supply of goods / services for the needs of three large operators (NSOC, KPO , TCO).

Today, the Unified Electric Power System of the Republic of Kazakhstan is operating normally.

Electricity generation in 2020 amounted to 108 billion kWh. At the same time, electricity consumption amounted to 107.3 billion kWh, which shows that the country's demand for electricity is fully covered.

In 2020, within the capacity market in the electric power generation sector, the volume of attracted investments amounted to more than 82 billion tenge.

At the expense of the republican budget, 24 projects are being implemented for the amount of 31.4 billion tenge, of which 6 projects have been completed.

The implementation of 6 projects made it possible to provide reliable and uninterrupted power supply to about 120 thousand people, heat supply to 18.1 thousand people and 10 social facilities.

Tax revenues to the budget amount to more than 5 billion tenge.

In order to increase the inflow of investments into the industry, the ministry took measures to increase the maximum permissible limit from 10 to 30 billion tenge per year for the modernization, reconstruction and renovation of power plants.

To stimulate the construction of flexible capacities, amendments were made to the current legislation on the electric power industry.

In 2021, it is planned to generate 109 billion kWh. electrical energy.

"In the current year. work will continue in accordance with the Electricity Law to stimulate the construction of flexible capacities and the implementation of the Hydropower Development Plan. Analysis of long-term development trends shows that carbon-free energy sources are becoming more and more popular. Renewable energy sources have been positioned as one of the vectors of development of the energy complex of Kazakhstan in recent years,” the head of the Ministry of Energy said.

In 2020, the obligations within the framework of the green economy concept were fulfilled, the share of renewable energy sources in the total energy balance of the country was brought to 3%.

Over the past 5 years, the installed capacity of renewable energy facilities has grown almost 7 times — from 240 MW in 2015 to 1,634.7 in 2020.

At the end of 2020, 115 renewable energy facilities with a total capacity of 1,634.7 MW are operating in the Republic of Kazakhstan (WPP — 486.3 MW; SES — 911.6 MW; HPP — 229.04 MW; BioPP — 7.82 MW).

The volume of electricity generated by renewable energy facilities amounted to 3.2 billion kWh.

Nurlan Nogayev added that about $1.5 billion of investments were attracted to the sector, 1,310 permanent jobs were created, and about 3,000 temporary jobs are created in the country's regions annually.

In 2021, it is planned to implement 23 projects with a total capacity of 381.1 MW and it is expected to attract about $370 million in investments.

In this year it is planned to produce about 3.5 billion kWh renewable energy.

In addition, during 2021, it is planned to further develop the platform for conducting online auctions for renewable energy sources.

“Kazakhstan continues to maintain its leading position in the global natural uranium market. The republic produces 42% of the world's uranium production. The volume of uranium production at the end of the year amounted to 19,586.6 tons. The issue was settled within the framework of the Agreement between the Governments of the Republic of Kazakhstan and the Russian Federation on mutual settlements in the disposal of nuclear weapons. As a result, the budget of the Republic of Kazakhstan received funds in the amount of 137.3 billion tenge,” the minister added.

The Law of the Republic of Kazakhstan on issues of civil liability in the field of atomic energy use was adopted.

Thus, the country will implement international obligations under the Vienna Convention on Civil Liability for Nuclear Damage.

The plan for uranium mining for 2021 is 22,575 tons.

In 2021, it is planned to complete a comprehensive environmental survey of the former Semipalatinsk test site with a total area of ​​18,311 sq km.

As a result of the survey, the radioecological state of the entire territory of the former test site will be determined.

By the 30th anniversary of the closure of the Semipalatinsk test site, it is planned to adopt the Law of the Republic of Kazakhstan "On the Semipalatinsk nuclear safety zone" to ensure nuclear and radiation safety on the contaminated land of the test site.

Heating season

The current heating season is running normally, consumers are provided with electricity and heat. There were no major technological violations in the republic.

In general, all combined heat and power plants and boiler houses in the district heating zones comply with the temperature schedules for the delivery of heat energy to the heating networks.

As of March 1, 2021, 3.3 million tons of coal (19% more than last year) and 106.2 thousand tons of fuel oil have been accumulated at the fuel depots of energy sources, which corresponds to the approved standards.

Control in areas of hydrocarbons and subsoil use

In the areas of subsoil use for hydrocarbons, production of oil products, gas and gas supply, 170 control measures were carried out in 2020.

108 licenses were issued, for which the amount of the license fee was 8.5 million tenge.

Also, in 2020, 208 permits for flaring raw gas were issued and 10 gas network organizations were accredited.

In 2020, the Ministry of Energy adopted 104 legal acts:

- 3 laws;

- 1 Presidential Decree;

- 28 resolutions of the Government;

- 2 orders of the Prime Minister;

- 70 orders of the Minister of Energy.

This year, it is planned to adopt 7 bills, including bills on the use of atomic energy, on the Semipalatinsk nuclear safety zone and the accompanying bill.

Also, a bill was developed within the framework of the legislative initiative of the deputies of the Parliament on the issues of amending the Code "On Subsoil and Subsoil Use" on the issues of uranium mining.

“The processes of globalization and economic development in the new realities forced the whole world to reconsider its approaches. The head of state in his Address to the people of Kazakhstan dated Sep. 1, 2020, 'Kazakhstan in a new reality: Time for action' established a strategic goal of digitalization as a basic element of all reforms. However, within the framework of digitalization and expanding the use of information technologies, the Ministry of Energy does not forget about information security, which is critically important,” the minister of energy said.

Thus, the entire information and communication infrastructure of the state body was brought in accordance with the requirements of the legislation in the field of informatization.

Measures are also taken to protect personal data and proprietary information as part of minimizing information leakage channels.

Chief Director for the Nuclear Fuel Cycle of NAC KazAtomProm JSC Mazhit Sharipov reported that last year was not easy for all countries, the pandemic affected all spheres of industry, it was necessary to reorganize under difficult realities.

So, in 2020, technologies were obtained from the Canadian company Cameco for the refining and conversion of uranium on a gratuitous and perpetual basis. At present, the issue of creating a refining plant for uranium oxide-oxide with a capacity of 6,000 tons / year is being worked out.

“Kazatomprom took part in the work on bringing the legislation of the Republic of Kazakhstan into compliance with the 1997 Vienna Convention on Civil Liability for Nuclear Damage. In May 2020, the Law of the Republic of Kazakhstan ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Civil Liability in the Sphere of the Use of Atomic Energy’ was adopted, and this is important for the development of the nuclear industry of the Republic of Kazakhstan and the implementation of significant projects, such as construction TVS plant in Kazakhstan, IAEA LEU Bank,” Sharipov said.

A lot of work has also been done on the Fuel Project. The nuclear fuel cycle includes redistributions from uranium mining to the production of nuclear fuel for nuclear power plants.

Uranium mining. After the introduction of a state of emergency in the Republic of Kazakhstan in March 2020, in order to prevent the spread of coronavirus infection, Kazatomprom took a number of specific measures aimed at preserving the life and health of employees of subsidiaries and dependent organizations. In particular, mining and preparation and repair and restoration work were suspended in order to minimize the one-time presence of workers at workplaces. In this regard, production and financial plans for 2020 were promptly adjusted.

"On April 7, 2020, we announced a reduction in the planned targets for uranium mining from 22.7 thousand tons to 19.7 thousand tons, and for uranium production from 22.7 thousand tons to 19.5 thousand tons," informed Sharipov.

The company took the necessary measures to ensure the continuity of the activities of subsidiaries and affiliates, and also prepared reserves to ensure the achievement of production targets for 2021.

In general, the measures taken made it possible to fulfill the plans for the extraction and production of uranium: 19.6 thousand tons of uranium were mined and 19.5 thousand tons of uranium were produced, as well as to meet the financial indicators in 2020.

By the end of 2020, Kazatomprom retained its status as a world leader not only in production, but also in sales. The company sold over 16 thousand tons of natural uranium. At the same time, we continue to expand the geography of supplies and strengthen our position as a reliable supplier in the global nuclear chain, selling products to the largest energy companies in the world. Thus, in 2020, several American energy companies joined the Company's customer base.

Along with this, during 2020, work continued in the field of the nuclear fuel cycle, incl. on the creation of new NFC links on the territory of the Republic of Kazakhstan.

“Refining project — as noted at the beginning of 2020, we received technologies for the refining and conversion of uranium. A feasibility study was developed for a project to create a refinery for 6,000 tons of nitrous oxide of nuclear purity, the feasibility study passed the examination and now Kazatomprom is considering the economic feasibility and technical solutions for the further implementation of the project. Here I would like to emphasize that these are technologies that allow eliminating the formation of liquid radioactive waste, which will improve the overall environmental situation,” said the head of the company.

For the Fuel Project. Despite the negative impact of the global pandemic on the timing of the project, in 2020 Kazatomprom, together with the Chinese company CGN-URC, completed the construction of a plant for the production of fuel assemblies (FA) based on UMP.

“In 2021, it is planned to complete the certification of the plant's production line by the technology owner, the French company Framatome, and to start commercial production of fuel assemblies. If the situation with COVID does not worsen in the Republic of Kazakhstan, China, France / Germany and the plant is timely recognized as a certified supplier of fuel assemblies by the PRC, then the first batch of fuel assemblies is planned to be delivered to nuclear power plants in China in July 2022,’’ Sharipov said.

As the director noted, the company is fully aware of its full responsibility for creating and maintaining safe working conditions for employees, ensuring the safety of other persons related to the Company's activities, maintaining environmental safety and the natural environment in places where production activities are carried out.

A number of measures are being implemented aimed at achieving zero indicators in the field of industrial safety and improving the management system.

It is worth noting that the pandemic has accelerated digitalization processes in many industries. The nuclear industry is no exception. The implementation of digital information systems helps to optimize the time and resources spent on the implementation of daily tasks, which contributes to the increase in the efficiency of business processes in the Company.

In 2020, Kazatomprom completed a number of large automation projects aimed at creating a digital ecosystem to improve the Company's activities: SAP ERP; Integrated planning system; CRM system; Pilot project Mining and geological information system (GGIS).

In general, in 2020, the net benefits from the implementation of the Digital Transformation Program in the Company were forecast to be 1.9 billion tenge. For the period from 2021 to 2025, according to the plan, net benefits of 7.9 billion tenge are expected.

Project “Recycling or reuse of equipment and materials”.

According to the director of the company, the essence of this event is to improve the processes of reuse of materials and equipment during mining preparatory work, thereby not spending the budget on the purchase of new materials and equipment, as well as not leaving these materials until liquidation works are carried out.

The second project, preparatory work for the transition to the new model of Production Asset Management. The main purpose of using this methodology is the Inspection of the operation of production equipment based on a risk factor assessment. This methodology will reduce the risks of injury to personnel and reduce the number of unplanned equipment failures.

The third project is being implemented under the Priority "Industrial Safety" and the reduction of energy consumption under the name "Green Thinking - Green Mindset.’’

Another of the projects within the Industrial Digitalization priority is the development of AR / VR technology, which will allow modulating various types of repair work, thereby eliminating the possible risk of potential production risks.

In addition, the enterprises of Kazatomprom are taking measures to save energy and improve energy efficiency. In 2020, 146 events were carried out for subsidiaries and dependent organizations.

As advanced technologies, the enterprises have put into operation solar water heaters, reactive power compensators, variable frequency drives for electric motors of pumping units, recuperators for utilizing and saving thermal energy. The economic effect of energy saving measures amounted to 847,130 thousand tenge, while the plan was 910,637 thousand tenge.

In 2020, 74 contracts were concluded for research and development (R&D) of NAC Kazatomprom JSC and subsidiaries and affiliates. Introduced into production — 32 R&D. The company filed 17 applications for the grant of patents for inventions / utility models, and also received 18 titles of protection for an invention / utility model.

Kazatomprom is the leader among subsoil users of the Republic of Kazakhstan in terms of the number of intellectual property objects.

In 2020, within the framework of improving the systematic integrated approach to R&D, the Policy of Scientific and Technological Development of Kazatomprom was updated, which defines the priority areas of scientific and technological development.

Scientific activity of Kazatomprom is carried out by three scientific corporate centers: Scientific Institute IVT LLP, Scientific Center of Volkovgeologiya JSC, Scientific Center of UMP JSC.

Also, in order to maintain competitive advantages, Kazatomprom, following modern trends, uses modern digital technologies, so in 2020 R&D projects were launched to develop various systems using artificial intelligence and Big Data.

As part of measures to optimize the asset structure of NAC Kazatomprom JSC, in the period from 2015 to the end of 2020, the number of subsidiaries and affiliates was reduced from 82 to 40 units. At the moment, work on the process of optimizing the asset structure continues.

In order to achieve its strategic goals, Kazatomprom has identified priority tasks for 2021, such as:

- Digital KAP;

- quality of finished products and packaging;

- nuclear fuel cycle;

- new sources of growth;

- development of a risk culture;

- effective communication.

As part of these priority tasks, Kazatomprom will continue to implement projects that will not only maintain its leading position in the uranium market, but also enter new redistributions with value-added products. The implementation of the tasks set will strengthen the position of Kazakhstan in the world arena and increase the well-being of the people.

General Director of the KAZENERGY ALE Bolat Akchulakov also noted that during 2020, together with the Ministry, work was and continues to improve the legislative regulation of subsoil use.

Now the main emphasis is placed on the preparation of amendments on investment agreements in the field of subsoil use for hydrocarbons, developed in connection with the proposals of AKSII submitted to the Head of State. The Association, represented by the experts who participated in the development of the Subsoil Code, assists the Ministry in this work.

“Separately, I would like to note that along with the questions of foreign investors, there is a whole block of conceptual issues where there is a need for improvement and general regulation, that is, concerning all subsoil users,” said Akchulakov.

These are, in particular:

1) issues of implementation of the reform of accounting for reserves;

2) the issues of reforming the mechanism of deductions for research and development, where the new model is currently being discussed;

3) issues of general stimulation of investments in geological exploration;

4) issues of improving the state examination of project documents, ensuring liquidation, licensing in the field of hydrocarbons and others.

“In our opinion, all of the above should eventually be reflected in amendments to the Subsoil Code in order to take into account both the issues of foreign and national investors in the future round of improving the investment climate in the oil and gas industry. If questions of a general nature go into another draft law, I would like to draw the attention of the Ministry's leadership to the need to take such a draft law into account in the government plan,” said the head of the company.

At the same time, with the support of the Ministry and other state bodies, in 2020 a number of the Association's initiatives were included in the Tax Code.

Including: amendments on the mineral extraction tax on groundwater, allowing to reduce the tax burden of subsoil users by about 5 billion tenge for 2018-2020, and on other issues.

Separate important issues on which work is underway today are:

1) implementation of NC KMG's proposals for state support of current and future offshore projects in terms of ETP;

2) implementation of the proposals of the national operator KTG for state support of projects for the modernization of gas transportation infrastructure;

3) expanding the scope of ANN to future contracts concluded on the basis of special investment agreements mentioned above, and other measures of their fiscal stimulation, including stabilization of tax and customs regimes on the date of conclusion of investment agreements;

4) within the framework of fiscal incentives, we believe it is also advisable to develop an additional package of measures to support depleted and low-profit fields.

On the instructions of the Ministry, the Association annually monitors the production and financial activities of companies in the industry. In 2020, monitoring was carried out on 26 subsoil users operating under the generally established tax regime. Additionally, the analysis of the impact of low oil prices on the production and financial activities of 48 subsoil users was carried out.

In 2021, the Association will continue to participate in:

1) improving market relations in the domestic market of petroleum products through e-commerce (gasoline, diesel fuel, bitumen and liquefied petroleum gas) and other issues

2) developing legislation in the field of forming EAEU common markets for oil, petroleum products and gas.

“We consider an important result of work in 2020 to update the Concept for the Development of the Fuel and Energy Complex until 2030, where a number of the Association's proposals have been adopted. Much attention is paid to the work on amendments to compensate for the costs of renewable energy sources, the construction of flexible capacities, the participation of the EPO in the creation of the regulating capacity; achieving a certain level of profitability in the production of electricity,” Akchulakov said.

One of the key areas of work last year is new environmental legislation. A number of important proposals of the Association found support in the working group of the Majilis, in particular, on:

1) excluding the regulation of water injection for reservoir pressure maintenance;

2) limitation of liability for proper waste management until the moment of transfer for recycling or disposal;

3) preservation of decreasing coefficients for EPO, which are not transferred to KEP;

4) the division of a new sanction (economic benefit): for new ones — in the absence of a permit or declaration, for existing ones — in the form of saving money as a result of violation of environmental legislation;

5) postponement of the implementation of the AFM from 2021 to 2023.

At the level of the EAEU technical regulations, the following issues have been worked out:

1) on not excluding the requirements for establishing minimum distances between the main pipeline and facilities, buildings and structures;

2) on the establishment of transitional provisions of the technical regulation on oil safety until Jan. 1, 2023.

Work is continuing to agree on the lists of standards for the EAEU technical regulations on the requirements for trunk pipelines and on gas safety.

Chair of the Board of JSC NC KazMunayGas Alik Aydarbayev also spoke at an expanded meeting of the collegium of the Ministry of Energy. The pandemic, the slowdown in the growth of the world economy, as well as the restrictions under the OPEC + agreement had a significant impact on the work of the national company — oil and gas production, oil transportation and processing, and gas exports decreased significantly. However, thanks to the joint measures of the Government, the Ministry of Energy and KazMunayGas, it was possible to minimize the negative effect and avoid dramatic consequences — production was not stopped and production personnel were not reduced.

These measures made it possible to continue the implementation of major projects. For example, record volumes of seismic exploration were carried out in the Taisoigan block, where structures were identified that, following the results of drilling, could increase recoverable reserves up to 127 million tons. Considering the fact that the residual recoverable resources of all EMG fields are 81 million tons, the identified potential of the block will make a significant contribution to the development of the enterprise.

Alik Aydarbayev noted that by the Resolution of the Government and orders of the Minister, exports were exempted from paying excise tax, and customs duties on light and dark oil products were zeroed. The ban on the export of petroleum products to the EAEU countries was also lifted and conventional bans on the supply of petroleum products to Kazakhstan were introduced. As a result, in 2020, Kazakhstan exported record volumes of light petroleum products, while the country's domestic market was 100 percent supplied with domestically produced petroleum products.

“The Ministry of Energy played a special role in the signing of the Settlement Agreement between the Government of the Republic of Kazakhstan and the Contractors of the Karachaganak project. As a result of the resolution of the dispute, the Republic received a one-time monetary compensation in the amount of $1.3 billion, as well as a number of other additional investment agreements. I would like to remind you that the Ministry at the initial stages of the arbitration process supported the issue of non-participation of KMG and KMGK in payments for the settlement of the dispute, in connection with which, after a series of negotiations with foreign contracting companies and the Government of the Republic of Kazakhstan, NC KazMunayGas JSC and KMG-Karachaganak LLP were exempted from payment of the financial contribution and tax payments on it," Aydarbayev noted.

According to him, currently there is a disparity in the rates of export customs duties on oil and oil products compared to the Russian Federation. As part of the ongoing tax maneuver, the Russian Federation annually reduces the rates of export customs duties (with complete zeroing by 2024). If the current fiscal burden persists, it will be difficult for us in Kazakhstan to compete with Russian products on export markets. Moreover, there is a risk of re-export of Kazakhstani oil products from the Russian Federation.

“Based on this, we propose to consider the possibility of carrying out a similar tax reform to gradually reduce export customs duties on oil and oil products with their complete zeroing. In addition, there are proposals in the part of the Tax Code. For example, the current code provides for the collection of excise taxes on the export of light petroleum products for oil suppliers (tellers). This rule leads to double taxation of the same product by excise tax in Kazakhstan and in the importing country,” said the chair of the board of JSC NC KazMunayGas.

At the moment, the Ministry of National Economy has initiated amendments to the Government decree in terms of zeroing the excise tax when exporting petroleum products by oil suppliers. KMG proposes to fix such a norm on a permanent basis in the Tax Code. Aydarbayev believes that the cumulative effect of these measures will positively affect the export potential of Kazakhstan and increase the competitiveness of our oil products.

“We also need further support in terms of acquiring subsoil use projects and attracting strategic partners in the Al-Farabi and Kalamkas-Sea-Khazar offshore blocks, as well as a number of onshore subsoil areas. The ongoing negotiations between the Ministry of Energy and KMG are constructive, the results of which maintain a balance of interests for both the state and investors. We believe that negotiations on the Al-Farabi project will be completed in the near future, and this will give impetus to the implementation of geological exploration in the Caspian,” he said.

Deputy Prime Minister of the Republic of Kazakhstan Roman Sklyar took part in the meeting of the collegium of the Ministry of Energy of the Republic of Kazakhstan. Summing up the results of the board, Roman Sklyar noted that new goals and objectives have been set for the Ministry this year.

Thus, the ministry will continue to work on the implementation of major major projects such as the future expansion project at Tengiz, the removal of production restrictions on gas (LPNG) and the project of the 4th gas re-injection compressor at Karachaganak.

“According to the protocol instruction of the Head of State within the framework of the Council of Foreign Investors on the effective participation of the state in the implementation of the Kashagan project, this year it is necessary to start construction of a gas processing plant based on raw materials from the Kashagan field with a capacity of 1.150 billion m3 of raw gas. Within the framework of the President's Address 'Kazakhstan in a new reality: Time for action,’ the Head of State instructed to put things in order and improve exchange trade, including in the field of oil products. In this regard, the Ministry of Energy, together with the Ministry of Trade and Integration, needs to ensure the start of the sale of oil products through commodity exchanges in March this year,” the deputy prime minister noted.

In addition, according to him, this year it is necessary to complete the construction of the reverse of the Kenkiyak-Atyrau oil pipeline with a capacity of up to 6 million tons per year and by the end of 2021 to complete the transition of the sale of liquefied petroleum gas through electronic trading platforms, which will make this industry.

Roman Sklyar also instructed to approve the Comprehensive Plan for the Development of the Gas Industry and update the General Scheme of Gasification of the Republic of Kazakhstan, which will make it possible to efficiently use the country's energy resources and rationally distribute budgetary funds during the construction of gas distribution networks. After the Comprehensive Plan for the Development of the Gas Industry is approved, it is necessary to ensure a high-quality modernization of the gas transmission system.

At an expanded meeting of the Government, Head of State Kassym-Jomart Tokayev set the task to take measures to accelerate the ongoing oil and gas chemical production, as well as create attractive conditions for potential investors. In this regard, given the importance of this industry for the country, it is necessary to keep under control the implementation of the National Project for the Development of Petroleum Chemistry until 2025 and the development of an investment agreement.

Summing up the results of the collegium, the deputy prime minister outlined the importance of timely fulfillment of the tasks of the Address of the Head of State to the people of Kazakhstan and program documents of the government.


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