KEY INDUSTRY TRENDS IN 2023
Reduction in oil production volumes by OPEC+ countries
In April 2023, OPEC+ countries agreed to reduce oil production until the end of the year. Kazakhstan also joined this initiative. This means that the oil market will remain under pressure throughout 2023, and the price of a barrel will continue to rise. Immediately after the announcements of the reduction in oil production, global oil prices sharply increased. Oil-producing countries are interested in maintaining high prices and increasing their own revenues. However, this initiative may have a negative impact on the economies of countries that are oil consumers. Nevertheless, OPEC+ has expressed readiness to further restrict supply at any time.
Increased risks of a recession in the global economy, including due to the energy crisis
International tension, including political tension, leads to imbalances in global markets, slowing economic growth, and even recessions. In 2023, the main global risks are geopolitical confrontation, trade wars, energy crisis, inflation, and social unrest. The key and necessary factor in confronting these challenges is partnership. The question of reliability and stability of energy resource supplies is more important than ever.
The potential of countries not involved in geopolitical confrontation can be unlocked in a new way. This includes Kazakhstan, which has sufficient hydrocarbon resources and is seeking to develop oil export opportunities.
Changes in the geography of energy resources supply
Geopolitical tensions around the world are redirecting hydrocarbon resources from the West to the East. While economic growth is slowing down in the West, it is recovering in the East, leading to an increase in demand for energy resources. In the Asian region, demand is being supported by the lifting of COVID-19 lockdowns in China, where the economy is reopening and fuel consumption is growing.
For Kazakhstan, diversifying its oil export routes is also a top priority. Currently, the country exports the majority of its oil through the BTC pipeline system. However, in 2022, the Ministry of Energy of Kazakhstan, together with interested parties, developed a Roadmap, at the direction of President K.K. Tokayev, to diversify export corridors, which includes the development of the Trans-Caspian route, the loading of capacities in the northern direction through the Atyrau-Samara trunk pipeline, the modernization of oil loading berths in the Aktau seaport, as well as the expansion of sections of the Kazakhstan-China trunk pipeline to increase oil exports to China. In April 2023, the Head of State once again set a goal to accelerate work on the development of large oil and gas projects and export transport corridors.
Global underinvestment in the industry
Global underinvestment in the oil and gas industry is being observed worldwide. From 2016 to 2019, the average amount of investment in the industry was $450 billion, but in the COVID-19 affected year of 2020, it dropped to $307 billion. Thus, the real indicator over five years amounted to just over $2.1 trillion, which is $900 billion less than required. According to experts, it may take from 3 to 5 years to compensate for the existing gap. All of this negatively affects the replenishment of the resource base and requires attention from world governments. Exploration of new hard-to-recover deposits is currently unavailable due to limited investments, technologies, and economic recession.
Digitalization of the energy sector
The digitization of the industry and the use of artificial intelligence and machine learning at all stages – from design and construction to the operation of deposits – are of particular importance in light of new economic realities. President of Kazakhstan K.K. Tokayev, the government of Kazakhstan, and the Ministry of Energy of Kazakhstan have repeatedly pointed out that the future of energy belongs to new solutions and business models. All the trends that are laid today will find their development in 20 and 30 years.
Currently, innovative “smart” technologies are being implemented in Kazakhstan’s energy sector, such as the system for monitoring and controlling transient processes (WAMS/WACS), digital devices for relay protection and automation (RZA), the dispatch control and information collection system (SCADA), the automated system for commercial accounting of electricity (ASUE), the information system for accounting of oil and gas condensate (ISUN), and others. They allow improving production and business processes in the industry.
Climate “pause” and “green” initiatives
A pause has been taken in the fight against global warming. Despite the fact that due to the energy crisis, European countries are returning to the use of coal generation, which affects the environment, long-term climate policies adopted during the popularity of energy transition remain in force. Issues of increasing efficiency from the point of view of equipment reliability, the application of new materials and technologies, as well as environmental solutions, continue to affect the entire industry. In this regard, countries of the world must continue to promote climate and “green” agendas.
In Kazakhstan, the current system of state support for the development of renewable energy sources (RES), developed taking into account the best international practices, has been enshrined in legislation since 2009. In 2022, there were 130 RES facilities in the country with an installed capacity of 2400 MW. In 2023, the share of RES in the energy structure will reach 5%.
Development of energy infrastructure
The development of energy infrastructure facilities requires close attention from the state. For example, in Kazakhstan, an outdated energy infrastructure is operating at the limit of its capabilities, due to the high wear of utility networks, serious accidents occur in almost all regions of the country. To counteract this, in March 2023, President K.K. Tokayev called for a revision of approaches to infrastructure development and the adoption of a National Infrastructure Plan aimed at forming a sustainable infrastructure framework for the country, which should reflect the main problems of infrastructure development and ways to solve them.
The following session formats are proposed as part of the business program:
- Plenary session (presidium seating);
- Joint sessions with major international organizations
(EAEU, UN ECE, IRENA, Energy Charter, etc.);
- Ministerial session (free seating in chairs);
- Strategic sessions (free seating in chairs);
- Panel sessions (free seating in chairs, with no more than three speakers);
- Round tables;
- Conversation with the top leader in a lunch format;
- Energy Dialogues (high-profile guest interviews in a 1-on-1 format)
- Energy Podcast (small-scale deep-dive sessions for industry experts);
- Thematic breakfasts (high-level breakfasts with CEOs, business breakfasts for TNK, diplomatic breakfast, Digital breakfast);
- Practical seminars for technical industry specialists.
Days of Kazakhstan’s Partners
In 2023, the 30th anniversary of Kazakhstan’s diplomatic relations with a number of countries (Brazil, the European Union, Indonesia, Qatar, Kuwait, Slovakia, Tajikistan, the Czech Republic, and others) will be celebrated.
As part of KEW-2023, a large-scale event called “Days of Kazakhstan’s Partners” will be organized in Kazakhstan for the first time, united by a single theme. The event will be a joint project of the KAZENERGY Association, the Government of the Republic of Kazakhstan, the governments and diplomatic missions of partner countries, and companies operating in the energy sector of Kazakhstan.
At the KEW-2023 venue, bilateral dialogues will be organized, opportunities for expanding cooperation in the energy sector will be discussed, and solutions to problems will be proposed.
At KEW-2023, bilateral dialogues will be organized to discuss possibilities for expanding cooperation in the field of energy and ways to address problems.
One of the important projects at KEW-23 should be a series of presentations by Kazakhstani regions in the energy sector on the topic of “Creating Investment Trust”. This is a relevant and multifunctional platform for getting acquainted with the socio-economic development of Kazakhstan’s regions and their unique investment opportunities, potential energy projects for attracting capital.
The presentation of investment projects in the oil and gas industry and the energy sector by region on a single platform will be organized for the first time not only in Kazakhstan, but also in the territory of Central Asia and the Caspian states.
The event proposed as part of KEW-23 will allow each region of the country to expand the boundaries of investment dialogue and uncover additional potential for attracting new investors interested in financing energy projects in different regions.
In particular, Kazakhstani regions will be able to offer investors to participate in the modernization of the network of strategic TPP complexes throughout the country. Relevant projects in the field of electric power engineering, modern coal generation, nuclear industry, including coverage of thermonuclear energy issues, are also of interest.
The main participants in the event will be the akimats of cities and regions of the country, Kazakhstani and foreign companies, international funds, investment companies, financial institutions and organizations, private investors. However, a limited number of participants is envisaged.