Kazakhstan, Turkmenistan, Uzbekistan need to redirect investment flows as combustibles’ future spells doom

LONDON (TCA) — The wider Caspian region, which comprises the Caspian littoral states and the lands to their east, is sitting on a vast riches of subsoil resources of which combustibles are made to quench the world’s ever increasing thirst for energy. Those who dedicate their lives and/or cash to such resources hardly ever miss an occasion to stress the need for them, downplaying the growing importance of alternative resources, located not under but on and above the earth’s surface and being infinite.

The fact that coal, oil, gas and uranium pollute (uranium being the most dangerous among them carrying the risk of radioactive contamination) and offer no long-term answer to the eventuality of dwindling supplies is also being downplayed – for the moment, that is. Because daydreams cherished by drillers and diggers are being disturbed by louder and louder wake-up calls coming from the place on which it all depends – namely the market place. In all: hydrocarbon represents a dying industry.

Holding back governments

Especially the coal industry is fighting with its back against the wall. Member states of the European Union and the BRICS bloc (Brazil, Russia, India, China, South Africa) are putting caps on the use of coal for electric power generation because of its disastrous effect on public health. And even though the same states are planning the construction of well over a hundred new nuclear power plants together, most of them are replacing aged and derelict existing ones rather than expanding the atomic power industry.

The continuing absence of a fool-proof solution for liquid and solid waste (including the contaminated remains of expired atomic power plants) and the threat of another Fukushima keep holding back governments from giving priority to the sector. Countries like Kazakhstan (the world’s largest uranium producer holding the world’s third-largest reserves), Canada and Australia have tried to put caps on output but responses from miners have remained inadequate.

Outdated facts and figures

Kazakhstan holds close to 25 billion tonnes of bituminous coal and 40 billion tonnes of lignite coal under its soil, according to government figures dating from 2012. This places the country among global top producers – potentially, that is. With dwindling demand in Russia, China and India, much of the existing reserves will never be tapped and further exploration is off the agenda. The same is true with uranium. Though both have been considered “transition resources” in energy supplies till recently, it seems now that only gas is holding that position, and for a much briefer period than so far assumed.

Central Asia reserves and production

What is true for Kazakhstan is true for neighbouring Uzbekistan, which has explored reserves such as 1.853 billion tonnes of brown coal and 47 million tonnes of black coal. Total coal resources are put at more than 5.7 billion tonnes. It was expected that 2016 uranium production would increase from 2,400 tonnes to 4,200 tonnes.

This leaves oil and gas. According to the Kazakhstan Energy Ministry, proven hydrocarbon reserves, both onshore and offshore, are estimated to amount to 4.8 billion tonnes, or more than 35 billion barrels, while as of 2001 the explored in-place reserves of oil were only 2.9 billion tonnes. Furthermore, according to some experts, there are probably more reserves of oil in fields located in the Kazakh section of the Caspian Sea, which may be over 17 billion tonnes or 124.3 billion barrels.

Mixed messages

Governments of Caspian and other Central Asian states are sending mixed and sometimes contradictory messages into the world concerning future energy resources, often based on outdated facts and figures. At the Ministerial Conference themed ‘Meeting the Challenges of Sustainable Energy,’ Central Asian countries and the International Renewable Energy Agency (IRENA) released the ‘Astana Communiqué on Accelerating the Uptake of Renewables in Central Asia,’ highlighting the role of renewables in addressing the region’s emerging energy challenges. Kazakhstan is showing off its intention to go ahead with the process of “energy transition” at the Astana Expo, but in reality the country spends only 1 per cent of its energy-related investments on renewables, and has set its target for renewables’ share in energy provisions at 25 per cent – for 2050, that is. It means that Kazakhstan, and with it other Central Asian states, is lagging behind the current global trend in which renewables are conquering markets at incredible speed.

Global spending

“Between now and 2040, global spending on new electric power generation is forecast to total $10.2 trillion. Of that total, 72% — $7.4 trillion — will be invested in renewables, with solar claiming $2.8 trillion and wind accounting for $3.3 trillion of the total. Annual spending is forecast to reach around $400 billion by 2040,” reads a report by the Wall Street Journal citing data provided by Bloomberg.

Funds for different sector

This situation has put oil multinationals which have invested heavily into Kazakhstan, on to the crossroads – aided by constraints on emissions which are the most stringent factor in the current “energy tsunami”. “More than $2 trillion of planned investment in oil and gas projects by 2025 could be redundant if governments stick to targets to lower carbon emissions to limit global warming to 2 degrees Celsius, according to a report by the Carbon Tracker think tank and institutional investors,” in the words of a Reuters news report posted on June 20.

According to the report probably five of the most expensive projects around the world will not be needed if the global warming target is to be met and around two thirds of the potential oil and gas production would be surplus.

Shift in capital investment

What the Caspian and Central Asian republics will have to take into account is an upcoming shift in capital investments (even if ongoing projects such as the second phases of the fields of Tengiz and Kashagan are still to go ahead which is questionable) away from combustibles. The urgent issue now is how to keep those funds in place but with different sector destinations. This is beyond doubt the most difficult task governments are facing since the break-up of the USSR. Flanked by two of the world’s leading industrial powers, regionalisation looks like a must, but it has to be remembered that it is not a panacea to the absence of national economic strength.