December 2019

Greenfield developments in Central Asia ensure stable oil supply in the medium term

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Oil production in Central Asia has remained rather stable since 2010 and is currently trending at around 2.9 million bbl/d. This oil output level is forecasted to be maintained in the medium term as well, supported by large greenfield developments that started to produce in the last couple of years, and sanctioned discoveries set to be put on stream in the early 2020s. This article assesses the outlook for the Central Asia region, illustrated by three key drivers: oil supply, resource potential from unsanctioned projects and capital investments.

Figure 1 depicts oil production in the Central Asia region by country, from 2010 to 2025. Production levels have remained relatively flat since 2010, trending at around 2.9 million bbl/d. It is currently forecasted that oil supply will be maintained at a similar level up to 2025 as well. Kazakhstan is the largest oil producer in the region, contributing 65% of total oil output in 2019. Azerbaijan makes up another 26%, with Uzbekistan and Turkmenistan taking up significantly lower shares. Both players are mostly considered to be gas-producing countries with little oil reserves held. Oil production base in Central Asia is rather mature with production levels largely supported by giant fields put on production over the recent years. In particular, the start-up of the first phase of the Kashagan field, contributing nearly 350,000 bbl/d at plateau, was instrumental in supporting oil production in the region. Similarly, the second phase of Shah-Deniz in Azerbaijan that started up last year and is set to add 70,000 bbl/d at peak is a vital contributor to the stable medium-term profile. Moreover, a number of important discoveries have already been sanctioned with first oil expected in the early 2020s. Specifically, Tengiz further growth project (FGP), early production from Absheron and ACG fields will be essential for oil production in the region towards 2025. In the longer term, discoveries currently waiting in the pipeline to be sanctioned will play a fundamental role in the supply dynamics.

Figure 2 depicts total recoverable resources for the top ten oil discoveries expected to reach FID in the next ten years in Central Asia. The second phase of Kashagan is by far the largest unsanctioned development in the region, with estimated recoverable resources of around 5.3 billion boe. The giant Kashagan field was discovered in July 2000, and had since suffered from several delays and cost overruns. Although first phase production had started in 2013, it was soon suspended pending pipeline replacement, with the field put back on stream in 2016. Production form the second phase is not expected before 2030. Other projects in Kazakhstan dominate the list of top unsanctioned oil fields, and include Kairan, Kalamkas-More and Karatobe fields, expected to be sanctioned around 2025. In Turkmenistan, the second phase of Goturdepe North contains an estimated nearly 250 million bbl in recoverable resources. Notable recently sanctioned projects include Azeri Central East, which reached FID in April 2019. The project has estimated recoverable resources of nearly 300 million bbl and is first production is targeted for 2023. 

Figure 3 depicts total capital investments into oil fields in Central Asia by the current life cycle of the projects included. Investments have been declining gradually from $13.6 billion in 2010 to around $11 billion in 2017. Last year spending increased again by over $2.6 billion, driven by investments into Tengiz FGP in Kazakhstan that is currently under development and is expected to begin producing towards 2022. Similarly, in 2019 investments into Tengiz FGP coupled with the start-up of infrastructure development at ACG field in Azerbaijan, will support strong capex levels in the region this year as well. Going forward, however, spending is anticipated to decline again with investments into sanctioned fields largely being sunk and development of discovery fields really picking up only from the mid-2020s. Therefore, total oil field investments in the region are currently anticipated to fall to around $5.2 billion towards 2023, increasing again to $7.2 billion by 2025, thanks to the second phase of Kashagan and Goturdepe North project in Turkmenistan.

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Stable oil production in the medium term in Central Asia can be attributed to increasing contributions from recent developments, such as Kazakhstan’s Tengiz FGP and Azerbaijan’s ACG (Azeri Central East). High levels of capital expenditures already made in the last two years in these developments paves the way for lower investments going forward until the next investment cycle in the mid-2020s as a result of new sanctioning. In the longer term the region’s production will be supported by the discoveries awaiting development.