Authorities in Kazakhstan suspect toxic emissions of “dangerous substances” from Karachaganak – one of the world’s largest gas and condensate fields – is to blame for the mass poisoning of children in the country’s northwest last week.
There were atmospheric emissions of highly toxic hydrogen sulfide beyond permissible levels from Karachaganak on November 27, the day before 20 children and three teachers were rushed to hospital in the village of Berezovka, Serik Karamanov, the prosecutor of West Kazakhstan Region, said on December 3.
The emissions were the result of a gas leak during flaring eight and a half kilometers away by Karachaganak Petroleum Operating (KPO), Karamanov said in remarks quoted by the Uralskaya Nedelya local newspaper. KPO is an international consortium that includes Britain’s BG Group, Italy’s ENI, US-based Chevron, Russia’s LUKOIL, and Kazakhstan’s KazMunayGaz.
The children and teachers were rushed to hospital after they started fainting en masse at a village school, while other villagers complained of dizziness and nose bleeds. “Weird things are happening here,” as one put it to Tengri News.
The ruble vs the tenge over the last 12 months. The sharp change in February indicates the first tenge devaluation. Since then, the ruble has continued to slide, again putting pressure on the tenge. xe.com.
As the price of oil falls, and as Russia’s Central Bank struggles to keep the ruble from hitting a new record low each day, Kazakhstan’s currency is facing pressure on two fronts. The major oil producer, whose economy is tightly linked to Russia’s, already sharply devalued the tenge once this year. But facing these new challenges, can the Kazakh National Bank hold its currency stable? And can Kazakhstan keep its books balanced?
Higher output and weaker global demand have pushed the price for benchmark Brent crude to $83 per barrel, its lowest in four years, down 27 percent since June. Oil, Kazakhstan’s chief export, is still above the government’s fiscal breakeven point of $65.5 per barrel, as calculated by the IMF. But it is below $90.6, where Kazakhstan faces a balance of payments deficit that puts further downward pressure on the currency. Moreover, trade with Russia is down 22 percent this year.
Kazakhstan’s “tenge weakened in forward markets last week, responding to a drop in the price of oil and sliding ruble,” Halyk Finance, an Almaty-based investment bank, said in an October 13 note. “The weakening of the Russian ruble and falling oil prices are the main fundamental reasons of the tenge weakening in forward markets.”
Russia is Kazakhstan’s main trading partner. And because of the falling price of oil, and the effect of sanctions the West has imposed on Moscow for meddling in Ukraine, the Russian currency has fallen nearly 20 percent this year. That has put the ruble-tenge exchange rate back where it was just before the tenge devaluation (see chart).
Moscow’s sanctions-struck energy giant Gazprom has announced it is no longer interested in buying Central Asian gas, leaving Turkmenistan and Uzbekistan dependent on exports to China.
Contractually, Gazprom officials have noted they are locked into obligations to buy from Ashgabat and Tashkent for the short term. But Gazprom is “working to annul these contracts,” Vsevolod Cherepanov, head of Gazprom’s Department for Gas Production, said at the St Petersburg International Gas Forum on October 7. Cherepanov did not explain the reasons for cutting back on purchases in Central Asia, but noted that Gazprom’s domestic production is expected to increase in the coming years.
According to Gazprom’s website, the official line remains that the production and import of “natural gas from Central Asia and the Transcaucasian region is an important element in the formation of [Gazprom’s] resource base, meeting the demands of Russia’s internal market, CIS countries and beyond. The business strategy of Gazprom in Central Asia rests on a strengthening of its position in this region. This will maintain and increase the share of Russian gas provided to its traditional markets in Europe.”
Gazprom’s exit will leave purchases of Central Asian gas an increasingly Chinese pursuit. In the two years prior to the opening of the China-Turkmenistan pipeline, which went into operation in late 2009, Gazprom imported an average of 63.4 billion cubic meters of gas (bcm) from Central Asia annually, over two-thirds of which came from Turkmenistan. In the years since, the company says, the volume going to Russia has shrunk to an average 34.1 bcm annually, less than a third of which is sourced in Turkmenistan.
Ninety percent of Turkmenistan’s exports are hydrocarbons. And 70 percent of all Turkmenistan’s exports went to China last year. So news that Iran, one of the country’s top three gas buyers, will soon stop importing Turkmen gas cannot be welcome in Ashgabat. It is almost like Turkmenistan threw off the Russian yoke only to shoulder China’s.
On August 11, Iranian Oil Minister Bijan Namdar Zanganeh said Iran would no longer need Turkmen gas as of next year, news agency Trend.az quoted him as saying. Zanganeh explained that Iran is ramping up domestic production.
It is quite a turn of events for Turkmenistan. In early 2010 a new, second pipeline bringing Turkmen gas to Iran was launched. At that time leaders in the two countries spoke about gas imports to Iran reaching up to 20 billion cubic meters (bcm) annually. A new gas-compressor station started operation in western Turkmenistan in December 2013, built specifically to export more gas to Iran.
With the post-Soviet region embroiled in its deepest crisis since the Cold War over Ukraine and Kazakhstan facing the impact of Western sanctions on Russia, strong leadership and staunch policy decisions would seem to be required from Astana.
But when President Nursultan Nazarbayev summoned his government today, instead he engaged in a bout of cosmetic cabinet tinkering that may distract officials seeking to steer Kazakhstan’s economy through some choppy waters.
Nazarbayev kept his prime minister, Karim Masimov, but made several ministerial replacements and announced a merger of ministries to cut their number from 17 to 12 and subsume some of Kazakhstan’s numerous agencies, departments and committees.
The streamlining of the bloated bureaucracy is welcome, but it will likely spark a bout of distracting infighting as bureaucrats fight to keep their jobs in a vastly diminished pool of vacancies.
Several ministries received a rebranding.
The Oil and Gas Ministry became the Energy Ministry under new minister Vladimir Shkolnik. But a new name and a new face will not solve Kazakhstan’s main energy problem, the stalled Kashagan oilfield, now not expected to resume production until 2016. In an unusual meeting of interests sure to please oil and gas companies, the Energy Ministry was also handed the environment portfolio.
The Economy and Budget Planning Ministry became the National Economy Ministry, swallowing up the Regional Development Ministry. The Emergencies Ministry was merged into the Interior Ministry, and the health and labor portfolios were combined at the new Health and Social Development Ministry. Aset Isekeshev, formerly minister of industry and new technologies, heads up a new Ministry of Investment and Development.
The collapse of the Soviet Union left industry scattered across the Fergana Valley regardless of modern borders. This oil field stands near Jany Jer, Kyrgyzstan, on the Uzbek border.
Last October, according to Kyrgyz accounts, Tajik soldiers crossed into disputed territory to repair an oil and gas well that a Tajik company had used since independence—pumping, by some estimates, 5 tons of oil a day. Kyrgyz border guards took notice, shut down the operation, and told the Tajiks to get lost.
Could that episode have led to a shootout between Tajik and Kyrgyz border guards near Ak-Sai on January 11? Both countries are starved for energy resources, so the idea they could fight over an oilfield seems plausible.
When Kyrgyzstan, Tajikistan and Uzbekistan were all Soviet republics, their winding, undefined borders mattered little. But when Moscow’s rule evaporated, the Soviets left an industrial legacy overlying the Fergana Valley’s new borders: crisscrossing pipelines and derelict derricks in no man’s land.
Since the 1970s, Soviet Tajikistan and then the Republic of Tajikistan had been pumping oil from the field, Katta-Tuz, which the Kyrgyz say is on disputed territory. “In August 2013 I told them to stop,” recalls Kyrgyz Deputy Prime Minister Tokun Mamytov. “It’s a big problem. […] The first problem is not the road, but oil and gas.” (Mamytov’s counterparts in Tajikistan refused to comment.)
A new report focusing on Azerbaijan’s energy sector is exposing flaws in an initiative designed to promote transparency in extractive industries.
The report, distributed December 10 by the watchdog group Global Witness, is titled Azerbaijan Anonymous. It shows that while Azerbaijan technically adheres to transparency standards established by the Extractive Industries Transparency Initiative (EITI) lots of money may still be disappearing into a black hole of corruption.
“Privately owned companies are making millions handling oil that belongs to the Azerbaijani people, yet the identity of their owners is hidden, and it is not clear why they are involved,” the report states.
“The lack of transparency highlights gaps in the EITI, as it shows that countries can comply with its rules, while large deals are being struck with very little transparency,” the report continued. “It is important for Europe that Azerbaijan keeps the oil and gas flowing and maintains transparent and well-run energy industry. Yet this briefing shows that much of the oil business in Azerbaijan remains opaque.”
An entire chapter of Azerbaijan Anonymous is devoted to the dealings of a mysterious entrepreneur, Anar Aliyev. Global Witness investigators determined that Aliyev has made at least 48 deals over the past eight years with the state oil company Socar, covering “all facets of the supply chain of the oil industry.” Even though there is a lengthy record, little is known about Aliyev’s background. “Despite Anar Aliyev’s apparent significance in Azerbaijani oil, publically available information on him is thin,” the Global Witness report stated.
Though you wouldn’t know it looking at how Russia treats activists who protest oil drilling in the fragile Arctic, Moscow has a soft spot for the environment – when it’s politically expedient.
Days after a European Union representative said Brussels is moving forward with plans to build a gas pipeline from Turkmenistan to Azerbaijan across the bottom of the Caspian Sea, a senior Russian official said Moscow is concerned about the effect on the Caspian’s “extremely sensitive ecosystem.”
Igor Bratchikov, the Russian president's special envoy for the delimitation and demarcation of borders with CIS states, also told Russia's RIA Novosti news agency on November 22 that the EU plans are an "interference in Caspian affairs.”
Bratchikov said that while constructing a trans-Caspian pipeline "it would be thoughtless and ruinous not to take environmental factors into account."
"The consequences of any incident would be catastrophic for the extremely sensitive ecosystem of the Caspian Sea," Bratchikov said. "Moreover, it is not Europeans or Americans, but the littoral states that would have to solve [problems] in case of a disaster."
The EU official, Denis Daniilidis, said the draft agreement, which he expects Turkmenistan and Azerbaijan to sign later this year, ensures that any pipeline adheres to the "highest environmental standards."
Authorities in Uzbekistan’s capital, Tashkent, have ordered local eateries to switch to alternative sources of fuel, such as coal and wood, in a bid to ease energy shortages this winter.
The measure was prompted by a surge in the consumption of gas for heating, Uzmetronom.com reported this month, and marks the start of Uzbekistan’s annual energy crisis.
Uzmetronom, which is believed to have ties to the security services, said cafes and restaurants in Tashkent would most likely use condensed natural gas sourced privately in bottles, rather than from government-run mainlines, for cooking. Others will burn wood. The Moscow-based Fergana News website reported on November 21 that "an increasing crisis in gas supplies and deliveries" had led to “skyrocketing” wood prices.
The launch of commercial production at Kashagan, Kazakhstan’s supergiant Caspian Sea oilfield, has been delayed again and will not begin until 2014.
Christophe de Margerie, chief executive of France's Total, one of the consortium partners, made the unwelcome announcement that the storied project would miss its latest target of starting commercial production in 2013. He said Kashagan “will not restart before the end of the year” following the suspension of production in October to deal with a gas leak. “It's more than simply repairing pipes,” Reuters quoted him as saying this week.
The North Caspian Operating Company (NCOC) – which also includes Kazakhstan’s state energy firm KazMunayGaz; oil majors ExxonMobil, Shell, and Eni; China’s CNPC; and Japan’s INPEX – has not confirmed that production will not re-start this year, but Hans Wenck, NCOC’s external communications manager, told EurasiaNet.org that “inspections and investigations will take some weeks to conclude.”
“The Kashagan oil and gas production remains shut in until the inspections are completed and results of the expert studies are available, and restart of the facilities can be carried out safely,” he said in an emailed statement on November 12. “Until such investigations are completed it will be too early to discuss any possible remedial actions and time required to implement them.”
Reuters quoted an unidentified industry source on November 11 as saying that Kashagan exports would restart in March “in a best-case scenario.”