Qatar-based UCC Holding’s investments in constructing gas processing plants (GPPs) at Kashagan are expected to lead to higher commodity gas prices in Kazakhstan by the time construction is completed, according to Nurlan Baibazarov, deputy prime minister and minister of national economy of Kazakhstan.
This issue was raised during a session of the Mazhilis, the lower house of Kazakhstan’s parliament while considering a draft law to ratify the agreement between the governments of Kazakhstan and Qatar on establishing a long-term strategic partnership in priority sectors. Member of Parliament (MP) Mukash Iskandirov asked Baibazarov how ready consumers would be for the gas prices specified in the agreement.
«The price for commercial-grade gas has already been set at $136 per 1,000 cubic meters by the time the GPP construction is completed. How affordable will this be for our domestic producers and residents?» Iskandirov asked.
Baibazarov responded that by the time these projects are completed, gas prices in Kazakhstan will align with the rates set out in the agreement.
«In the next two years, all project structuring will be fully completed and the implementation phase will begin. Regarding the pricing, we have set price commitments for the project period to ensure full return on investments. We should consider the cost of gas processing and its distribution to the domestic market and potential exports. We believe that by then, gas prices will be consistent with prevailing market conditions,» Baibazarov said.
The minister also mentioned that Kazakhstan is already on the path of gradually increasing gas prices.
«As for price affordability, we are gradually raising the cost of commercial-grade gas. This year, we have increased it by an average of 15%. However, we are working closely with QazaqGaz to address this issue and are largely willing to support socially vulnerable groups of the population. QazaqGaz will assist those in need of social support using its funds,» the minister added.
According to Baibazarov, the first two GPPs, with capacities of one billion cubic meters and 2.5 billion cubic meters per year, are at an advanced stage of readiness.
«The first project, valued at $1 billion, has already begun, with full financing secured. Construction and installation works are already underway. For the second project, the Samruk-Kazyna group is drafting the relevant joint activity agreement. We expect all formalities to be completed this year, allowing the parties to start structuring the financing. As for the six-billion-cubic-meter project, it’s still in the preparation stage, with project readiness anticipated next year,» Baibazarov said.
The construction of the main gas pipeline from Aktobe to Kostanay is also in the agreement preparation stage.
«Regarding the Aktobe-Kostanay gas pipeline, the parties are in the process of drafting an agreement. The same applies to other projects. We believe that in the next two years, the structuring of all projects will be finalized and actual implementation will begin,» the minister added.
The Vice Minister of Energy Alibek Zhamauov mentioned that the construction of the GPP with a capacity of one billion cubic meters per year is scheduled for completion by the end of 2026. Currently, 500 people are employed on-site. However, MPs questioned the necessity of involving new investors from Qatar in a project that has been ongoing in the country since 2021.
Earlier, the prime minister’s website reported that the GPP at the Kashagan field, with a capacity of one billion cubic meters per year, is scheduled for launch in mid-2026. This information was provided by Berik Abishev, the acting head of GPC Investment LLP, which is implementing the project.
According to Abishev, once the GPP is operational, it will produce 727 million cubic meters of commercial-grade gas per year, along with 218,000 tons of sulfur and 17,000 tons of gas condensate from one billion cubic meters of gas. Water for the plant will be sourced from the Astrakhan-Mangyshlak main water pipeline and the 110-kilowatt (kW) power transmission line is ready for connection. Additionally, the compressor station for injecting gas into the Intergas Central Asia main pipeline is already operational.
The project is underway in collaboration with North Caspian Operating Company (NCOC), Kashagan’s operator, and QazaqGaz. QazaqGaz is to supply up to 700,000 tons of liquefied hydrocarbon gas per year to the market and to complete the pipeline infrastructure needed for transporting one billion cubic meters of gas annually. The Phase 2A project will facilitate the transportation of 2.5 billion cubic meters of gas per year, while Phase 2B will handle six billion cubic meters annually.
In Feb. 2024, QazaqGaz and Qatar’s UCC Holding signed an agreement to implement the GPP construction projects at the Kashagan field jointly. It was later reported that the investment for constructing the first GPP at Kashagan is estimated at $1 billion.
The gas pipeline, stretching from the Bolashak onshore processing facility to the GPP, will be approximately 15 kilometers long. NCOC previously reported a reduction in the length of its section of the one-billion-cubic-meter pipeline for QazaqGaz from 14.4 kilometers to 13.88 kilometers. Kashagan, the first offshore oil and gas field in Kazakhstan’s sector of the Caspian Sea, has recoverable reserves estimated between 9 billion and 13 billion barrels of oil. Commercial production began on Nov. 1, 2016, with Kashagan producing 12.7 million tons of oil in 2022 and 18.8 million tons in 2023.
In a state-of-the-nation address on Sept. 2, President Kassym-Jomart Tokayev instructed the government to accelerate the construction of gas processing plants at the Kashagan and Karachaganak fields. He stressed the need to quickly implement effective incentives to ensure return on investment, including providing adequate rates and wholesale prices.
In February, QazaqGaz CEO Sanzhar Zharkeshov announced that the total value of four agreements with UCC Holding amounts to $11 billion. These agreements will facilitate the joint development of two GPPs with annual capacities of one billion and 2.5 billion cubic meters of gas. The agreements include provisions for attracting investments and organizing financing for the projects, which are expected to boost Kazakhstan’s marketable gas resources.
Additionally, QazaqGaz and UCC Holding will collaborate on constructing the second line of the Beineu-Bozoy-Shymkent pipeline, which will supply gas to the southern and central regions of Kazakhstan. They will also build a compressor station and a gas pipeline in the Kostanay region.
