Critical Energy Diversification Emphasized: Experts Assert Ongoing Importance of Oil and Gas

Critical Energy Diversification Emphasized: Experts Assert Ongoing Importance of Oil and Gas

Astana, Kazakhstan - Energy industry titans and experts convened at the Astana International Forum (AIF) on May 29 to deliberate the complexities of maintaining energy security, the balancing act of energy transition and sustainability, and the future trajectory of the oil and gas industry.

The AIF, a globally recognized dialogue platform, commenced in the Kazakh capital on May 29, with the event scheduled to continue on May 30. This year's edition brought together approximately 5,000 delegates to tackle pressing global issues, including connectivity, water security, and trade wars.

Addressing a full room, Kazakhstan's Vice Minister of Energy, Alibek Zhamauov, emphasized the continual relevance of energy security in the global arena. "Energy security assumes a central role in the global agenda, as the international community grapples with major challenges such as maintaining stable economic growth, technological progress, stable energy supplies, and the decarbonization of the sector," Zhamauov stated.

Zhamauov underscored the oil and gas sector's importance as the primary driver of Kazakhstan's economic growth, contributing nearly a quarter of the country's GDP. In 2024, 16 projects worth more than four billion tenge (US$7.9 million) were commissioned, a testament to the ministry's efforts to refine the regulatory framework.

The Kazakh official acknowledged that the government has introduced an improved model contract, offering a significant package of regulatory and fiscal incentives for geological exploration and the development of depleting fields. This mechanism is expected to attract around US$393.2 million annually and boost oil production at major fields to 60 million tons by 2045.

Following Kazakhstan's lead, oil production reached 47.7 million tons in 2024, with plans in place to surpass 100 million tons per year. Zhamauov detailed the government's commitment to developing new fields and diversifying export routes. The CPC pipeline serves as the most efficient route for exporting Kazakh oil, with 55 million tons of Kazakh oil transported via the pipeline in 2024 and 57 million tons planned for 2025.

Diversification also occurs via the Baku-Tbilisi-Ceyhan route, with an annual volume of 1.5 million tons, the Trans-Caspian international transport route, and the Atyrau-Samara pipeline through Druzhba, en route to Germany.

Zhamauov emphasized the development of the petrochemical industry as a priority within Kazakhstan's broader oil and gas strategy. He highlighted several ongoing projects, such as a polypropylene production plant commissioned in 2022 with an annual capacity of 5,000 tons, and a polyethylene facility projected to produce 1.2 million tons annually, currently in the early stages of construction and expected to be completed by 2029.

Global industry leaders echoed Zhamauov's focus on energy security and the ongoing significance of hydrocarbons during the panel session. Peter Larden, senior vice president at ExxonMobil Corporation, forecasted trends that may shape the industry's future. "Looking forward to the next half-century up to 2050, we expect the global population to reach about 10 billion people, necessitating a 15% increase in energy demand to meet societal needs," he explained.

Larden is confident that oil and gas will continue to play a "crucial role," with around 50% of the world's energy mix estimated to consist of oil and gas by 2050. This significance extends to industrial processes, manufacturing, and heavy transportation industries, particularly in Kazakhstan. "Oil and gas will remain critical components for countries like Kazakhstan," Larden asserted.

Larden also underscored the importance of an attractive and well-understood investment climate for attracting foreign investments that support long-term, multi-billion-dollar investments.

Some experts, like Matthew J. Sagers, vice president for energy at S&P Global, expressed cautious optimism as they observed two key trends in Kazakhstan. One trend is concerning, while another is positive, though the ultimate direction remains uncertain.

Investment in fixed capital in the upstream sector dropped from a peak of $12.8 billion in 2019 to $4.8 billion in 2020, a potential sign of declining oil production in Kazakhstan. Nevertheless, Sagers noted a rebound in electric power investment, which now stands at around $2.1-$2.2 billion annually, a significant improvement but still modest compared to the scale of the sector.

Dario Liguti, director for sustainable energy at the UN Economic Commission for Europe (UNECE), confirmed that energy security should not be confused with energy isolation or energy independence. Instead, global resilience hinges on interdependence, achieved through regional grid connectivity and cross-border energy trade.

Liguti offered a broader perspective on the energy trilemma, reframing it as a question of building a resilient energy system by closely examining affordability, reliability, and sustainability. He emphasized that energy collaboration and cooperation between countries contribute to enhanced energy resilience.

Liguti commended Kazakhstan for its potential to become a Central Asian energy powerhouse. However, he noted the region's high energy intensity, which ranks just behind Middle Eastern countries. Overall, Liguti expressed confidence in Kazakhstan's future, with a diversified and balanced mix of energy sources being key to that future.

In addition, Liguti mentioned Kazakhstan's decision to embrace nuclear energy, with its first nuclear power plant under construction. He also highlighted the critical role of raw minerals in the energy transition, emphasizing the opportunity to anchor new value chains for both trade and domestic energy production across various sources.

The general partner and sponsors of the Astana International Forum are the Samruk Kazyna National Welfare Fund, ERG, and Freedom Bank Kazakhstan. The official sponsors are Kazakhmys, Karachaganak, KAZ Minerals, North Caspian Operating Company, Tengizchevroil, Alatau City, Baiterek Holding, VISA, Stepnogorsk Bearing Plant, Caspian Oil, Qarmet, and RG Gold.

1. The AIF, held in Astana, Kazakhstan, delved into the complexities of maintaining energy security and balancing energy transition and sustainability, particularly focusing on the oil and gas industry.
2. Peter Larden, senior vice president at ExxonMobil Corporation, predicted that oil and gas will continue to play a crucial role in the world's energy mix, accounting for about 50% of the global energy demand by 2050.
3. In Kazakhstan's broader oil and gas strategy, the development of the petrochemical industry is a priority, with projects such as a polypropylene production plant and a polyethylene facility underway.
4. Global industry leaders at the AIF discussed the significance of an attractive and well-understood investment climate to encourage foreign investments that support long-term, multi-billion-dollar investments.
5. Dario Liguti, director for sustainable energy at the UN Economic Commission for Europe (UNECE), emphasized the importance of energy collaboration and cooperation between countries for enhanced energy resilience, and commended Kazakhstan's potential to become a Central Asian energy powerhouse.
6. The role of raw minerals in the energy transition was highlighted, with an opportunity to anchor new value chains for both trade and domestic energy production across various sources, including nuclear energy, in Kazakhstan.

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