Oil and Gas - The Times Of Central Asia

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Kashagan

Kazakhstan Presses Oil Giants as Kashagan Revenues Face Scrutiny

The media in Kazakhstan is once again debating the revision of production sharing agreements (PSAs) with foreign companies in the country’s major oil consortia. PSA LLP, the state-owned operator authorized by the Ministry of Energy to represent Kazakhstan’s interests in the North Caspian Production Sharing Agreement, has released new data on revenues from the Kashagan field, information expected to reignite calls to amend agreements with major Western oil producers in Kazakhstan’s favor. President Kassym-Jomart Tokayev has publicly backed the discussion. In January, he instructed the government to intensify negotiations with foreign investors. "The implementation of production-sharing agreements for large fields has allowed Kazakhstan to become a reliable supplier of energy to the global market. These projects have made a great contribution to the country’s socio-economic development. However, large investments require a long-term planning horizon. Therefore, the government must intensify negotiations on extending PSA contracts, possibly on revised terms that are more favorable for Kazakhstan,” Tokayev said at an expanded government meeting. The PSA company, headed by Tokayev’s nephew, Beket Izbastin, reported that in 2024, the Kashagan consortium’s total revenue from oil, gas, and sulfur sales exceeded $11 billion. Of this, 80% covered capital and operating costs (“Cost Oil”), while only 20% came from “Profit Oil,” amounting to $2.2 billion. Kazakhstan’s share was 10%, or $220 million. Including the $430 million in taxes paid by the operator, NCOC, the country’s total revenue was $650 million. “With revenues of $11 billion, the republic’s share, including taxes, was only 6%, the lowest among oil companies not only in Kazakhstan but globally,” PSA said. Under the current terms, Kazakhstan’s share of Profit Oil will not increase until three billion barrels have been extracted from Kashagan. Only the first billion has been produced over the past decade. Shareholders are expected to begin paying a 30% income tax soon; KazMunayGas has already transferred an initial $45 million payment from the Kashagan profits. The fairness of this revenue distribution is now a central point of debate. Some observers believe the renewed focus ahead of the next parliamentary session could signal that Tokayev will again raise the issue in his annual address, alongside agreements for Karachaganak and Tengiz, the other pillars of Kazakhstan’s oil sector. Tengiz operates under a contract expiring in 2033, earlier than Karachaganak (2037) and Kashagan (2041). At his press conference in Astana last month, Prime Minister Olzhas Bektenov confirmed that negotiations with major oil companies had only just begun. “Indeed, there is a view that the country’s interests are significantly infringed upon. We are starting negotiations with our consortium partners to conclude new PSAs for a new period. This will be done in a measured and balanced manner, without sudden moves, while defending the national interests of our country,” Bektenov stated. The question of what exactly constitutes “national interests” remains open. In February, Mazhilis deputy Edil Zhanbirshin linked the issue to Kazakhstan’s dependence on imported fuel. Despite the $3.7 billion spent on modernizing the country’s three oil refineries, annual processing volumes remain below 18...

Israel-Iran Escalation

Central Asia and Israel, a Pragmatic Relationship That Never Truly Blossomed

The conflict between Israel and Iran is having both international and regional repercussions. The situation has been further inflamed by the U.S. bombing of several Iranian nuclear sites over the weekend, with Tehran responding by threatening retaliation on U.S. soil through the use of sleeper terrorist cells and the possible closure of the Strait of Hormuz, through which over a fifth of the world’s oil supply passes. While Israel's geographical position places it at the heart of the Middle East, Iran's location brings the Islamic Republic into close contact with Central Asia. The consequences of the conflict are therefore likely to be felt heavily in the Central Asian region. The close relations between Tehran and the capitals of Central Asia, due in part to their geographical proximity, are often highlighted. Less explored is the nature of the relationship between Tel Aviv and Central Asia and the lines along which it has developed since the dissolution of the Soviet Union. On both the Israeli and Central Asian sides, despite all the differences, relations began in the early 1990s, mainly based on certain mutual interests. From Israel's point of view, relations with Central Asia would mean expanding the circle of Muslim countries with which it had friendly ties, gaining greater influence in the region, and reducing its diplomatic isolation. From the Central Asian perspective, the appeal lay in increasing the number of its international partners, coupled with a desire to access Israeli know-how in numerous fields, and the possibility, through relations with Tel Aviv, of having a privileged channel of dialogue with the United States. More than three decades after the dissolution of the Soviet Union, relations remain good for the most part. “The positive relationship between Israel and Central Asia is driven by a combination of strategic, economic, and geopolitical factors,” Dr Zeev Levin, Coordinator of the Central Asian Research Unit at the Harry S. Truman Institute, told The Times of Central Asia. “One of the primary drivers is mutual interest in security and counterterrorism. Economically, Israel’s expertise in water management, agriculture, and technology is highly attractive to the arid, resource-seeking nations of Central Asia that aim to modernize their infrastructure and diversify their economies beyond oil and gas. Additionally, fostering ties with Israel provides a means of diversifying the foreign policy portfolios of the Central Asian republics.” This positive relationship, however, seems to have lost momentum in recent years due to several factors. Central Asian republics have increasingly oriented towards the East, moving closer to China and other players such as South Korea, Japan, and India, or towards other partners, such as the European ones, with Italy at the forefront in this regard. As Levin points out, the relation has cooled due to several factors: “Central Asian republics did look to Israel in the first decade of independence, but in the last decade to a much lesser extent, since Turkey and China are less complicated and cheaper options. For Israel, the region was never a priority or a point of...

Oil and Gas

Turkmenistan’s Gas Swap Deals Could Be Collateral Damage from Israeli-Iran Conflict

Turkmenistan has the fourth largest reserves of natural gas in the world, but the country has found it difficult to export substantial volumes. Lack of export pipelines are one of the problems and it seemed Turkmenistan had partially solved this dilemma by arranging gas swap deals. Unfortunately for Turkmenistan, these deals involve Iran as the key country, and the Israeli-Iran conflict sheds new doubt on the ability of Iran to fulfill its part in the swap arrangements. So Close Turkmenistan signed a deal to supply 10 billion cubic meters (bcm) of gas annually to Iraq in late October 2024. It was the first major gas export deal Turkmenistan had signed in nearly two decades. That last big agreement was signed with China in 2006. It involved building four gas pipelines from Turkmenistan to China to eventually carry a combined 85 bcm of gas, 65 bcm of which would be Turkmen gas. Since the pipelines cross through Uzbekistan and Kazakhstan, both of those countries are allotted 10 bcm each of the capacity for their gas exports. The fourth branch that would have carried 30 bcm of Turkmen gas has not been built, leaving Turkmen gas exports to China averaging 35 bcm per year. At the moment, China is the only major customer for Turkmen gas. The second largest buyer of Turkmen gas is Uzbekistan, which only purchases about 2 bcm. Not even 20 years ago, Russia was purchasing more than 40 bcm of Turkmen gas, but by 2023 that had dwindled to 5.5 bcm, still leaving Russia as the second largest buyer of Turkmen gas. In July 2024, after negotiations over price broke down, the two parties chose not to renew that contract. That made the agreement with Iraq all the more important for Turkmenistan. However, there are no pipelines connecting the two countries. Yet So Far The Turkmen-Iraqi agreement calls for Turkmenistan to ship 10 bcm of gas to Iran, with Iran then sending 10 bcm of its gas to Iraq. Iran needs gas for its northern regions that are not connected to the domestic pipeline network that sources gas from the fields of in the south of the country. Turkmenistan has two pipelines to export gas to Iran. Both were built after independence in 1991, and could carry up to a combined 20 bcm. Since January 2017, when the Turkmen government made good on a threat to cut off Iran over unpaid bills for gas, almost no gas has been shipped through these pipelines. The first task is to perform maintenance, repairs, and upgrades on these pipelines so that Turkmenistan can physically send 10 bcm of gas to Iran. The Iranian pipeline to Iraq is functional. Iran was exporting gas to Iraq, but international sanctions on Iran hindered Iraq’s ability to pay for that gas. Prior to the agreement with Iraq, Turkmenistan signed a contract in early July 2024 with Iranian officials for the transfer of gas. It is unclear how far along Turkmenistan is in performing its pipeline...

Investments

Kazakhstan to Invest $15 Billion in Oil and Gas Chemical Industry Development

Kazakhstan is set to invest $15 billion in its oil and gas chemical sector through six major projects aimed at shifting the economy from raw material exports to high-value industrial production. The initiative was announced by Temirlan Urkumbaev, Director of the Oil and Gas Chemistry Department at the Ministry of Energy, during the Power Central Asia + China forum. Flagship Projects Underway One of the cornerstone projects is already operational: an integrated gas chemical complex for polypropylene production by Kazakhstan Petrochemical Industries Inc. (KPI), launched in 2022 in the Atyrau region. The facility processes raw materials from the Tengiz field and has a production capacity of 550,000 tons of polypropylene per year. In 2024 alone, it produced around 250,000 tons, spanning 12 grades of polypropylene. The project’s total cost was $2.6 billion. The second major project, a polyethylene plant with an annual capacity of 1.25 million tons, began construction in late 2024 within the National Industrial Petrochemical Technopark special economic zone (SEZ), also in Atyrau. To date, 49% of preparatory work has been completed. The plant’s launch is scheduled for 2029, with an estimated investment of $7.4 billion. It is expected to produce over 20 grades of polyethylene, 40% of which will be premium grade. “Excavation work for the pyrolysis unit has already started,” Urkumbaev stated. “International partners such as SIBUR, Sinopec, and EPC contractors including Tecnimont, Técnicas Reunidas, and Hyundai Engineering are involved. Their participation ensures compliance with global engineering and environmental standards.” Cluster Development and Strategic Goals Additional projects are being developed to produce butadiene, urea, and other products essential to agriculture and industry. All will be situated within the same SEZ, which spans over 3,600 hectares and offers tax incentives and established infrastructure. Currently, 18 companies are operating in the zone. According to Urkumbaev, the creation of an integrated oil and gas chemical cluster will generate over 19,000 new jobs and marks a strategic pivot from resource extraction to the production of high-tech goods with greater added value. “The era when Kazakhstan was seen primarily as a raw materials supplier is drawing to a close. We are building a new, more sustainable economy. The development of oil and gas chemistry is a path toward deeper resource processing, enhanced scientific capacity, and a stronger position in the global market,” he said. Government Commitment to Petrochemical Growth Oil and gas chemistry has been designated a strategic priority by the Kazakh government. Almasadam Satkaliyev, now head of the Atomic Energy Agency and formerly Minister of Energy, previously underscored the importance of redirecting liquefied hydrocarbon gas from transportation use to the petrochemical industry.

Bilateral Cooperation

Kazakhstan and Italy Forge a New Strategic Nexus

Italian Prime Minister Giorgia Meloni's visit to Kazakhstan marks a pivotal moment in the deepening relationship between the two nations. This diplomatic mission comes on the heels of historical ties reinforced by Pope Benedict XVI’s 2022 visit to the Central Asian nation, where he met with President Kassym-Jomart Tokayev. Benedict’s trip was a testament to Kazakhstan’s role in promoting interfaith dialogue and global peace, a legacy that continues to shape its international relationships. Now, with a new American Pope at the helm of the Vatican, Meloni has renewed Italy’s commitment to strengthening its partnership with Kazakhstan. Her meeting with Tokayev and participation in the C5+Italy Summit underline her focus on fostering collaboration in energy diversification, regional stability, and economic growth. The terms for Meloni’s arrival in Astana were set by Kazakhstan’s previous engagements with Italy, including President Kassym-Jomart Tokayev’s visit to Rome in early 2024 and his meeting with Meloni in Abu Dhabi in January 2025. Those substantive bilateral talks set the bilateral agenda in the joint context of Italian active Eurasian diplomacy and Kazakhstan’s own strategic vision. Meloni’s direct discussions with Tokayev focused on deepening bilateral diplomatic and economic ties; expanding cooperation in energy, trade, and defense; and discussing regional security and joint training programs. As she put it prior to departing Italy, “This visit confirms the strategic value of our collaboration and the excellent level of relations between our nations.” Kazakhstan’s geography, resource wealth, and evolving political posture since independence over a third of a century have also enabled it to craft a nuanced foreign policy balancing traditional ties with Russia and China against emerging alignments with Europe and beyond. Italy’s diplomacy, underpinned by proactive outreach and sustained by major trade and investment flows, has become Kazakhstan’s principal EU partner and third-largest global trading counterpart. Meloni’s engagement with Kazakhstan underscores her broader strategic vision of positioning Italy as a pivotal player in the evolving geopolitical landscape. Central to this ambition is her ability to connect Italy’s foreign policy with global power structures, including her relationship with former U.S. President Donald Trump, a bond that has bolstered both her personal stature and Italy’s diplomatic leverage. This alignment, rooted in shared ideologies of nationalism and sovereignty, allows Italy to project itself as a transatlantic bridge linking Europe, the United States, and strategically critical regions like Central Asia. Beyond energy and trade, Italy’s approach aims to institutionalize its presence in the region, as demonstrated by the simultaneous hosting of the Central Asia–Italy Summit, which builds on the “5+1” dialogue launched in 2019 and its 2024 iteration at the foreign-ministerial level. Convening this summit at the head-of-government/head-of-state level in Astana subtly underscores Kazakhstan’s linchpin role in regional coordination and Italy’s capacity to frame its engagement as a multilateral and strategic enterprise. Meloni’s ambitions extend to securing Italy’s role in stabilizing ties with Central Asia and former Soviet states. For instance, strengthening relationships with energy-rich nations like Kazakhstan underpins her focus on energy diversification, critical for reducing Europe’s reliance on Russian gas while...

Afghanistan

Kyrgyzstan Significantly Boosts Fuel Exports to Afghanistan

Exports of fuel and lubricants (F&L) from Kyrgyzstan to Afghanistan have surged in early 2025, according to the National Statistical Committee. In the first quarter of the year, Kyrgyzstan exported more than 40 million liters of gasoline and fuel oil to Afghanistan, a more than 100-fold increase compared to the same period in 2024. From January to March 2025, gasoline exports to Afghanistan’s Kunduz province reached $18.5 million in value, up from just 384,000 liters worth $212,000 a year earlier. Afghanistan now accounts for over 90% of Kyrgyzstan’s gasoline exports. Uzbekistan is the second-largest recipient, having imported 2.5 million liters of gasoline worth $1 million in the same period. The average export price stands at approximately $0.50 per liter. It is important to note that none of the exported gasoline is sourced from Russia. Under a bilateral agreement, fuel imported from Russia on preferential terms, grades AI-92 and AI-95, is designated solely for domestic use and is exempt from re-export. These Russian fuels are delivered duty-free via Kazakhstan, keeping retail gasoline prices in Kyrgyzstan around $0.80 per liter. According to the Oil Traders Association, the gasoline exported to Afghanistan and Uzbekistan typically includes the lower-cost AI-80 grade and fuel oil derived from local crude in southwestern Kyrgyzstan. In 2024, Kyrgyzstan imported 630 million liters of gasoline worth $277 million, primarily from Russia, with smaller volumes from Kazakhstan. Beyond fuel, Kyrgyzstan also exports other goods to Afghanistan, including: Approximately 8,000 tons of flour and vegetable oil annually; Around 12,000 tons of construction materials such as cement and metal structures. In return, Kyrgyzstan imports roughly 200,000 units of Afghan goods annually, including dried fruits, nuts, textiles, carpets, and other handicrafts.