The Other Energy Superpower: Central Asia? (Part I of II)

Ask anyone where fossil fuels come from today and they will probably say Canada, Qatar, Australia, Saudi Arabia, or the United Arab Emirates. This is not surprising seeing how these countries are the current leaders in exporting oil, natural gas, and coal in the world and will continue to do so over the next decade. However, what about countries that have not fully exploited their fossil fuels yet?

Central Asia is one such region that has been often neglected by the international media and investors. But how much oil, natural gas, and coal reserves do countries in this area of the world actually have?

Central Asian Oil

Of the five countries in this region, Kazakhstan holds the highest proven oil reserves at 30 billion barrels, making it rank 11th in the world. It also has 3 giant oil fields (i.e. oil fields that have 500 or more million barrels of proven recoverable oil) from which it produces the majority of its oil from. What is more important is that Kazakhstan’s oil production limit has not been reached, where in 2009 the country’s giant oil fields produced 1.682 million barrels of oil per day (bpd). This number is projected to grow over the next few decades as technology advances and Kazakhstan can successfully exploit not only their 3 onshore giants but also their two Caspian Sea fields (which have a proven reserve of 14 billion barrels of oil).

The next two Central Asian countries with the largest oil reserves belong to Turkmenistan and Uzbekistan who are currently producing 198,150 bpd and 70,880 bpd, respectively. Their total oil production potential is much smaller than Kazakhstan, as is their future perceived influence on the international petroleum market due to problems with transportation, regional stability, and lack of investment. Nonetheless, Turkmenistan has recognized this vulnerable position and decided to refine their crude in-house and export only petroleum products. This has allowed Turkmenistan to not only reap in value-added service fees but also provide for countries that may not have refining capabilities. Uzbekistan, on the other hand, has made it a priority to produce oil to meet domestic consumption needs rather than export to foreign markets.

Central Asian Natural Gas

In terms of natural gas, Turkmenistan takes the lead among its Central Asian neighbors at 7.504 trillion cubic meters, making it the 6th most abundant natural gas nation in the world.  Turkmenistan currently produces 38.1 billion cubic meters of gas a year (2009 est.). However, it is ranked at only 24 among all natural gas producers illustrating its potential in the coming years. Turkmenistan’s future success in this arena will largely depend on its ability to attract foreign investment while diversifying their consumer markets, where in 2009 it added Iran and China to its portfolio.

Kazakhstan and Uzbekistan come in second and third place for natural gas reserves at 2.407 trillion cubic meters and 1.841 trillion cubic meters. Kazakhstan’s natural gas production is behind in exploration, production, and general infrastructure when compared to its oil industry. The country has failed to implement domestic pipelines to connect its gas reserves in the west to its industries in the east. Pipelines to export gas to neighboring countries have not been completed as well. As a result, Kazakhstan was forced to import a sizable amount of natural gas from Uzbekistan up until 2009. However, recently Kazakhstan become a net exporter of natural gas and remains optimistic about their future in the industry due to its contract with the Chinese government to produce a Kazakhstan-China pipeline by 2014.

Uzbekistan, on the other hand, has been developing its natural gas production for years. It is currently ahead in natural gas production in Central Asia due to government initiatives that borrowed foreign loans to supplement the budding energy industry at the time. This has allowed the country to now rank as the 14th largest gas producing country in the world. Moreover, Uzbekistan’s natural gas is used for both domestic consumption and foreign export. However, Uzbekistan currently exports to only Kazakhstan, Kyrgyzstan, Tajikistan, and Ukraine due to its landlocked geographical location. This has made Uzbekistan heavily dependent on regional stability to carry out its contracts.

Central Asian Coal

In terms of coal, Kazakhstan again takes the lead with proven reserves of 31.3 billion tons, making it the most coal abundant country in Central Asia and 8th in the world. The Kazakh government predicts the coal will last for the next 100 years, but does not provide information on the country’s current production rates.  At the moment, the biggest importers of Kazakh coal are Russia and Ukraine. However, growing energy scarcity will make Kazakh coal enticing for China, Tajikistan, Kyrgyzstan, and Eastern Europe in the near future.

Kyrgyzstan comes in second place among the region’s coal reserves with 2.5 billion tons. Kyrgyzstan has a long history of coal production that started since the 1900s. During the Soviet Union era, state-owned coal mining companies were opened to feed the Soviet economy. However, since gaining independence Kyrgyzstan has been unable to operate many of these mining facilities due to lack of funding, infrastructure, and transportation. This has made Kyrgyzstan’s coal output drop dramatically in recent years.

Uzbekistan comes in third among Central Asian coal reserves with 1.9 billion tons. Uzbekistan has also seen a decline in coal production in recent years, where in 2009 the country produced 3.602 million short tons, some 25 thousand tons less than 2008.  Uzbekistan also heavily depends on coal (85%) for its power sector making it difficult to calculate how much coal is available for foreign export. Nonetheless, the government has shown significant interest in upgrading their technology to make their coal reserves, mining techniques, and energy usage more efficient.

So, what does this imply?

In the next post, a deeper look into the geopolitical, infrastructural, and diplomatic obstacles of Central Asia will be analyzed to determine the region’s ability to influence the future global energy market.


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