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Kazakhstan Energy Week-2019: Experts from around the globe discuss challenges of future energy

Friday, 27 September 2019, 11:06:43

During the XII Kazenergy Eurasian Forum held as part of Kazakhstan Energy Week-2019 on Sep. 26 in Nur-Sultan, panel sessions, conferences, round tables were held, where the issues in the development of the energy industry were discussed. Read more about the most interesting of them in the report by PrimeMinister.kz.

The XII Kazenergy Eurasian Forum aims to consolidate expert opinions on the further development of Kazakhstan's energy industry. The forum was attended by 2.5 thousand delegates from more than 50 countries.

At the opening ceremony of the forum, Prime Minister Askar Mamin noted that Kazakhstan is increasing the efficiency and productivity of traditional energy sources, and is also steadily strengthening its position as a regional leader in the field of renewable energy sources.

“Since the Expo in Astana in 2017, Kazakhstan has achieved significant success in introducing comprehensive green measures into the economy. To date, we have expanded our portfolio of renewable energy sources to more than 3,000 megawatts. In the first 6 months of 2019 alone, production in the sector increased by 31.7%,” said the prime minister of Kazakhstan.

The official opening ceremony of the forum was also attended by OPEC Secretary General Mohammad Barkindo, Chairman of the Board of Samruk-Kazyna Sovereign Wealth Fund Akhmetzhan Yessimov, Chairman of the Arctic Circle International Forum, ex-President of Iceland (1996-2016) Ólafur Ragnar Grimsson.

The opening ceremony was continued by the plenary session “Future of Energy Sources: Innovative Growth,’ during which questions were discussed regarding the situation on the world energy market in the coming decades, namely, conjugation with a new transformation in the era of global challenges - which direction will shift the geography and structure of demand for energy, how much will the energy dependence grow between different parts of the planet? The participants in the session drew attention to the role of international partnership in overcoming challenges, as well as the importance of national projects as the basis for future growth.

During the plenary session, Chairman of the Board of Samruk-Kazyna Fund Akhmetzhan Yessimov emphasized that the energy sector is very important for each state. It has an impact on national security.

“Kazakhstan has significant reserves of hydrocarbons and uranium. According to these indicators, it occupies leading positions along with other world leaders. At the same time, we are witnessing various scenarios for the development of world energy. Global trends are decarbonization of economies, the active introduction of smart technologies, digital transformation. Big data analysis, information technology, predictive analytics are becoming an integral part of the activities of energy enterprises,” said Yessimov.

According to him, the Samruk-Kazyna Fund plays a significant role in the development of the country's energy sector.

“Sharing responsibility for the future of the country, we are actively introducing innovative solutions, creating additional value, and increasing our production efficiency. The fund implements a large-scale privatization program approved by the Government, the goals of which are to replenish the National Fund, introduce best corporate governance practices, and ensure world standards of transparency and accountability. In recent years, 89 enterprises have been transferred to the competitive environment in accordance with the principles of the Yellow Pages. The proceeds are 192 billion tenge. It is planned to IPO 8 fund companies that are national operators in the energy, telecommunications and infrastructure sectors,” said the chairman of the board of Samruk-Kazyna.

The OPEC Secretary General Mohammad Barkindo, in turn, thanked the Government of Kazakhstan for its effective support and active participation in the OPEC Declaration of Cooperation.

“I am very grateful for the significant contribution of Kazakhstan. We will continue to look for opportunities for joint activities in ensuring stability of the global market,” said Barkindo.

The OPEC secretary general also noted the high energy potential of Kazakhstan.

“Today, Kazakhstan in many projects is a support for its neighbors. Giants such as Kashagan and other projects within the framework of which Kazakhstan is going to increase the production of liquid hydrocarbons should also be noted,” he said.

In addition, the Barkindo commented on the recent attacks on oil facilities in Saudi Arabia. According to him, Saudi Arabia has almost restored the level of oil production observed before the attacks on oil facilities of the state-owned company Saudi Aramco.

“Over the past few months, the global oil market has experienced the uncertainty of trade disputes and the consequences of geopolitical development. This uncertainty has also been exacerbated by recent attacks on energy supplies in Saudi Arabia, the largest producer in the world. About 5-7 million barrels of production were withdrawn from the market. Thus, the price of oil soared by more than 7%. This is the largest volatility we have seen in the last 30 years. And also, 5-7 million barrels were lost literally in one minute – this is the biggest loss in the history of oil. And a quick response from the government of the Kingdom and the national oil recovery company was crucial in order to avoid such expanded volatility. Any undermining of the safe supply of oil and gas in the world is a big violation for industry and the economy. OPEC, together with Kazakhstan, is committed to market stability,” said Barkindo.

The chairman of the Arctic Circle international forum, the ex-president of Iceland, Ólafur Ragnar Grimsson, in his speech named the main challenge of the 21st century – the problem of heating and cooling cities in which ⅔ of the world population will live in the future.

According to him, the challenge is demonstrated by two very clear facts. The first fact is that today more than half of the world's population lives in cities. After 20 years, already ⅔ of the world population will live in megacities in Asia, Africa, and America. The second fact – 40-50% of the energy that is produced in the world goes to heating and cooling cities. While transport, including cars, is only 20%.

“The greatest energy demand of the 21st century is connected with the answer to the challenge – how do we heat and cool the cities in which ⅔ of the world population will live. Unfortunately, within the framework of the current discussions and debates in the field of energy, this main challenge is not on the agenda. If we take this with full responsibility and find effective solutions to this problem, as well as to preserve the global environment, then we will achieve success,” said Grimsson.

According to him, every nation, every energy company in the world should come together and solve this fundamental question – how to heat and cool cities in the 21st century, while preserving the environment.

However, the expert believes that a solution to this problem already exists.

“There is a solution that is based on an already existing technological model that my country developed at the end of World War II. Despite the fact that many people are well acquainted with solar and wind energy, many do not suspect that under our feet there is a huge energy resource. If we can utilize one percent of the heat inside the planet, this will be enough to provide the demand and demand for electricity for thousands of years. Thanks to the oil industry and all the technological developments, we can use the heat under our feet inside the planet in an efficient way,” Grimsson said.

An interactive discussion entitled “Future of Oil: Reality and Forecasts” was held at the forum site, where issues of oil consumption in the world, the geography of oil supply and demand in the coming years, as well as further cooperation within OPEC were discussed. Minister of Energy Kanat Bozumbayev, Secretary General of OPEC Mohammad Barkindo, Chairman of the Management Board of KazMunayGas National Company Alik Aidarbayev, Senior Vice President of ExxonMobil Upstream Oil & Gas Thomas Schuessler, General Director of Eni S.p.A. Alessandro Puliti and other representatives of world’s oil and gas companies took part in the discussion of pressing topics of the oil and gas industry.

Opening the discussion, the Minister of Energy Kanat Bozumbayev noted that Kazakhstan would comply with the OPEC + agreement on limiting oil production, but would continue to increase volumes in the future.

“Kazakhstan is committed to its obligations. A number of countries doubted our ability to fulfill obligations. Until the end of this transaction, we will remain in the corridor that our colleagues have guaranteed. We hope that this transaction, in one form or another, will be continued. This is the right initiative. I want to make a statement that we, as a responsible partner, will fulfill our obligations. We believe that in the medium term we will continue the implementation of our major projects. This is, first of all, the expansion of Tengiz, the extension of the production shelf on Karachaganak, the increase in production on Kashagan. We assume that we, within the framework of OPEC +, of course, will fulfill our obligations, but in the medium term we will increase the volume of oil production by 2023-2025. Until that time, in any case, we will be in the corridor somewhere around 1.8-1.9 million barrels per day. We intend to behave like that,” said Kanat Bozumbayev.

Chairman of the Management Board of KazMunayGas JSC Alik Aidarbayev spoke about the company's participation in the development of the oil and gas industry in Kazakhstan.

“Today issues and problems relevant to KazMunayGas were discussed, this is both the price of oil and instability in the global energy markets. In general, I would like to note that the current oil price corridor within the range of $60-70 is quite acceptable for KazMunayGas. We want stability, we are building our short-term and long-term plans, guided by such a price for oil. We would like the prices to be stable,” Aidarbayev noted during his speech.

In response, OPEC Secretary General Mohammad Barkindo emphasized that OPEC is extremely focused on oil price stability and will adhere to this strategy of price stability.

“Subsequently, the events in Saudi Arabia, we noticed that this significantly affected volatility and is not beneficial for both producers and producing countries, and for consuming countries. In stability there is interest both in producing countries and in consumers. Without stability, it will be difficult to plan something, it is difficult to attract financing for projects. Therefore, we are now focused on this goal. We will continue to work to isolate oil from politics” said Barkindo.

CEO of Eni S.p.A. Alessandro Puliti noted that in the world over the past five years there has been a significant increase in oil and gas production. In this case, the focus is shifted to liquefied gas. According to him, this shift between oil and gas is very important.

“In Kazakhstan, we have already invested about $12 billion. Mostly in the Kashagan field. We are grateful and happy to work with partners. We are pleased to see that there is the potential to further increase this work. We have come to an agreement with the Government of Kazakhstan to expand the field in the Caspian. They decided to invest in this project,” Pulity said.

ExxonMobil Upstream Oil & Gas Senior Vice President Tom Schuessler noted that Kazakhstan with its large resources is very attractive for foreign investors.

“Over the years, investing in Kazakhstan, we have had great success with partners from the Kashagan and TCO fields. As in any other country in which we develop projects, the most important thing for us is stability. Kazakhstan is a very attractive country for investment,” Schuessler said.

Bozumbayev, continuing the topic of attracting investments to the country, noted that from year to year the regulatory regime with regard to foreign investors in Kazakhstan is becoming softer and softer. In 2017, the revised Subsoil Use Code was adopted, which greatly facilitates the entry of a new investor into the market. In addition, a number of concessions occurred in the revision of the Tax Code. Also, today a new Environmental Code is being developed, which will take into account all the wishes of energy operators.

The panel session “Gas Factor as a Key Trend in the World Energy Sector” discussed issues of maintaining the position of gas as the most demanded hydrocarbon resource, the future of major gas production growth projects in the world, and gas supply of Kazakhstan. Executive Director of the Global Gas Center Valerie Ducro, Chairman of the Supervisory Board of the Invest Group Andrey Gaidamaka, General Director of the Tecnicas Reunidas Industrial Facilities Division Arthur Crossley, Upstream Director of Royal Dutch Shell plc Pavan Chulukuri, Senior Analyst for the Caspian Region and Europe Wood Mackenzie Ashley Sherman, Vice Minister of Energy of Kazakhstan Murat Zhurebekov shared their opinions on these issues.

According to the Vice Minister of Energy Murat Zhurebekov, Kazakhstan is currently deliberately following the path of building up its gas potential, including production and export capacities. At the same time, gas supplies to the domestic market are the top priority for this area. The dynamic development of the gas industry is extremely important for the entire economy of Kazakhstan.

Director of Royal Dutch Shell plc. Pavan Chilukuri, in turn, pointed to a number of challenges faced by countries developing sour gas reserves.

“For example, on Kashagan about 25% of non-valuable components in the gas. This means that these 25% cannot be sold, because it has no value,” said Chilukuri, however, noting that at present there are various opportunities for monetizing gas in various product lines.

Arthur Crossley, Technical Reunidas Board Member, expressed the view that liquefied natural gas will be a priority in the future. According to his forecast, until 2022 there will be an increase in demand for LNG, which requires an increase in investment in its production. He agreed with the opinion of a colleague from Royal Dutch Shell that “sour gas can be used, and there are technologies for this.”

“I believe that the gas industry will grow, and we must respond to the environmental needs of the world,” he said.

At the same time, Andrey Gaydamaka, representing the Invest Group, a member of the Corporate Governance Expert Council of the Central Bank of the Russian Federation, recalled that, “of course, shale gas, which contributed to the development of LNG, contributed to significant technological success. But so far he has been subsidized. Usually this is not discussed at such meetings, this is an important factor.” He pointed out that in the foreseeable future, China will remain the largest consumer of gas. According to him, today China is already 1.5 times higher than the US in energy consumption.

The Executive Director of the Global Gas Center Valerie Ducro noted that natural gas is the “solution among other solutions” to reduce CO2 emissions. In her conviction, the gas industry is a key factor in decarbonization.

Ashley Sherman, senior analyst for the Caspian region and Europe, Wood Mackenzie, noted the role of Kazakhstan in organizing the supply of natural gas to China.

“It is important to develop the gas industry in terms of the strategic future, that is, to increase the role of gas in the production combination. Indeed, the proportion of gas is growing. Exploration is increasingly confronted with finding exactly gas fields. And we must create a new energy balance,” he said.

During the presentation, “Investment Risk Assessment in the Energy Sector-2019,” Anna Petraki, Investment Coordinator for the Secretariat of the International Energy Charter, spoke about specific risks affecting energy investments that can be mitigated by adjusting policies, legal and regulatory frameworks.

According to the Secretary General of the International Energy Charter Urban Rusnak, over the past 5-10 years, more changes have occurred in the energy landscape than in 30-50 years. According to the UN, today every seventh trial in the world is held on issues under the jurisdiction of the Charter.

According to the Deputy Director of the Foreign Economic Policy Department of the Ministry of Foreign Affairs of Kazakhstan Ruslan Bultrikov, Kazakhstan is currently actively working to improve the investment climate in the energy sector.

The panel session “Energy for Sustainable Development” raised the role of fossil fuels in future energy systems, discussed national future strategies for commodity-oriented economies. The discussion was attended by the Director of the Office of the Executive Secretary of the United Nations Economic Commission for Europe Kire Ilioski, Director of Investment Planning and Risk Management of PT Pertamina H. Setavan, Chairman of the Institute for Electric Power and Energy Saving Development JSC Baurzhan Smagulov, Director of the ADB Office in Kazakhstan Giovanni Capanelli and others.

The Director of the Office of the Executive Secretary of the United Nations Economic Commission for Europe, Kire Ilioski, said that energy policy cannot develop in a vacuum. The UN Economic Commission for Europe is committed to transforming the energy system in such a way that the quality of life of each state is enhanced.

“We work with communities and organizations personally, at the regional and international levels,” he informed.

Ekaterina Paniklova, Senior Program Coordinator, Istanbul Regional Hub for Europe and the CIS, UNDP, noted that sustainable energy is one of the factors of sustainable development. To overcome today's challenges, countries need to work together. She added that the country's recent competitiveness indicator has been “greening the economy.”

The participants in the session agreed that work on the transition of energy to sustainable development requires considerable effort. However, for greater effectiveness, proper government policies are needed.

The panel session “Investing in Energy Sector: Opportunities and Partnership” was dedicated to the development of investment projects in the energy sector and creating a favorable investment climate for investors over the next 10 years. The discussions were attended by Vice Minister of Energy Murat Zhurebekov, founder of Digital Academy M. Mankeev and others. The session was moderated by Vice Minister of Foreign Affairs Ermek Kosherbayev.

President of the Kazakhstan Society of Petroleum Geologists Baltabek Kuandykov, during the round table "Geology of the Future: From Environmental Security to Innovation" raised the issues of geological exploration as one of the drivers for the development of the digital economy. The participants exchanged views on creating a systematic approach to the development of the geological industry: are modern research and development capable of increasing the efficiency of oil and gas production in Kazakhstan. The discussions were attended by Deputy Minister of Natural Resources and Ecology of the Russian Federation Eugeny Kiselev, Vice President for Intelligence in the Caspian Region Greg Riley and others.

During the session “The Role of Renewable Energy Sources in Future Energy Systems,” Ricardo Gorini, Senior Manager of the Renewable Energy Roadmaps Program of IRENA, informed the participants about the implementation of the IRENA Renewable Energy Roadmap. According to him, over the past 10 years, electricity consumption in the world has increased by 2%. The increase in energy consumption indicates the need to involve alternatives, including renewable sources, in the energy balance.

Ainur Sospanova, director of the renewable energy department of the Ministry of Energy of the Republic of Kazakhstan, said that currently in Kazakhstan 40 megawatts of electricity are generated from solar energy, and another 250 megawatts are in wind farms. It is planned that by 2020, 1 gigawatt of electricity will be generated in the country due to renewable energy sources.

In the future, renewable energy will actively develop in the country at the level of households and small and medium-sized businesses. This needs to be encouraged at the level of legislation.

Sigsteinn Gretarsson, CEO of Arctic Green Energy Corporation, spoke about Iceland's experience in renewable energy. At one time, Iceland changed the world’s view of energy. This is the only country where 100% of the generated electricity comes from renewable energy: 25% from geothermal and 75% from hydropower. Iceland has been developing renewable energy for 115 years – since 1904, when the first hydroelectric station was built here. The experience of Iceland in this regard is very valuable to the whole world.

Aida Sitdikova, Director of the Department of Energy and Natural Resources in Russia, the Caucasus and Central Asia of the Eurasian Bank for Reconstruction and Development, referring to EBRD financing of renewable energy projects in Kazakhstan, noted this decision as “economic feasibility.” According to her, from 2013 to today, the bank has already financed projects with a total capacity of more than 600 megawatts.

It is worth noting that the Kazenergy Eurasian Forum is designed to provide an effective dialogue between participants in energy markets, to consider current trends and directions in the development of the energy system. The prospects and strategic initiatives put forward in the framework of this event create favorable conditions for the dynamic and sustainable development of the country's oil and gas and energy complex.

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