This Special Report of Fitch Ratings assesses credit risks and opportunities surrounding the Caspian oil and gas sector as companies further develop their potential.

Oil and Gas of Kazakhstan. Reserves, Production and Investments

As is known, our country has extensive resources of crude hydrocarbons which most part is located in the Kazakhstan sector of the Caspian Sea. The guarantee of further attraction of investments in the oil and gas sector of Kazakhstan is the upward trend in the world prices for oil, the existing and planned routes of hydrocarbons transportation to the market of the Southern Europe and Asia, and the participation of major foreign companies in the Kazakhstan oil production projects.

Oil Property Redistribution

At the beginning of 2010 the government of Kazakhstan, which earlier was affirming the investors about “inviolability” of the tax regime for oil contracts, said that it could revise their conditions and cancel the privileges. Apparently, these words will be followed by actions. At least, the evidence is in the number of inspections, fees and criminal charges, imposed onto a number of petroleum companies…

We should not Worry about Oil Pipelines Capacity 

Judging from the forecasts made by the Ministry of Oil and Gas, over the next five years the existing Kazakhstan transport infrastructure capacity will fully suit the outputs of oil which the Republic of Kazakhstan is planned to export to the foreign markets. This will allow us to focus on the maximization of profits with minimum costs, while the problems of diversification will remain at the level of geopolitical discussions.

Caspian Gas. The Balance of Interests

The Caspian region and its significant hydrocarbon reserves is the center of conflict of interests between the key players of the world energy market – Russia, China, European Union and USA. At the same time, looking to diversify the supply of their gas, the exporting countries declare the intention to increase gas production dramatically and promise to supply blue-sky fuel to nearly all potential buyers.

ECD at the Double Tariff for Oil Companies

According to the initiators from the Finance Ministry, the increase of the export customs duty by twice will provide the government with mechanisms for the maximum exemption of natural resource rent while Kazakhstan will enter the list of countries with a high tax burden for subsoil users. However, the oil companies are not very happy about this innovation; it looks like they will deliver a serious battle against the financiers. The price paid is an increase of tax burden on hydrocarbon exporters by 6.4%.

Kazakhstan’s Economy is Demonstrating Growth

Conclusions in short of the socio-economic development in the first half of 2010 evidence, that the influence of the world financial crisis on the economy of Kazakhstan has been mainly left in the past. Growth is observed in fact in all key sectors of economy, except for financial and construction sectors.

Economy in Figures. 2005-2009

Statistical Overview