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Kazakhstan 2016 | ENERGY & INDUSTRY | INTERVIEW

TBY talks to Vladimir Sergeyevich Shkolnik, Minister of Energy, on the country's oil and petrochemical industry, the floating tenge, and renewable energy.

Vladimir Sergeyevich Shkolnik
BIOGRAPHY
Vladimir Shkolnik has been the head of the Ministry of Energy since August 2014. He was the Chairman of the Board of the JSC National Atomic Company Kazatomprom from May 2009 to August 2014. After graduating from the Moscow Engineering-Physics Institute in 1973, he began his career at the Mangyshlak energy plant as an engineer-physicist. From 1992 to 2009, he held various senior managerial positions, including General Director of the Atomic Energy Agency, Minister of Science and New Technologies, Minister of Science, President of the Academy of Sciences, Deputy Prime-Minister of Energy and Mineral Resources, Deputy Head of the Presidential Administration, and Minister of Industry and Trade.

What actions has the Ministry of Energy taken to support the oil industry in the face of falling commodity prices?

The operations of companies engaged in the oil and gas business in Kazakhstan focus on the implementation of social programs on a regional and national scale. Issues of protection of the oil extracting and petrochemical industries as well as the preservation of jobs remain among the top priorities of the Ministry of Energy. High volatility of global hydrocarbon prices observed over the recent year and a half still exerts a negative influence. Over the course of 2015, the Ministry has maintained day-to-day monitoring of oil extraction and a system-wide monitoring of global oil prices. It also promptly responded to emerging challenges with a view to ensuring the continuous operation of companies. It should also be noted that the government of the Republic of Kazakhstan has cut export customs duty for oil from $60 down to $40 as of January 2016. Currently, concerned state agencies and organizations have agreed on a scale of rates of export oil custom duties with reference to global oil prices, and it is expected that this measure will be approved by late February 2016.

What opportunities have opened up for the local power sector as a result of the floating of the tenge? Are there any emerging attractions for FDI in the sector?

Switching to a floating exchange rate has entailed the devaluation of the national currency, the tenge, which has undoubtedly affected companies in the electrical energy industry. Power generating equipment is delivered to Kazakhstan mainly from Russia, Ukraine, Germany, France, and China. The devaluation of the national currency means higher prices for spare parts and power engineering equipment from foreign manufacturers, and consequently power-engineering companies have to channel more funds into the procurement of equipment. The scheduled upgrade of production facilities at a number of major enterprises envisages the procurement of high quantities of foreign equipment, which will affect value increase and ultimately cost of production and financial performance of companies. As for attraction of FDI into the power-generating sector of Kazakhstan, it is necessary to mention new opportunities for potential investors to participate in the upcoming privatization plans, which have been announced by the government of Kazakhstan.

How do you assess the potential of Kazakhstan's renewable energy resources?

Experts estimate the potential of renewable energy resources in Kazakhstan to be at around 1 trillion kWh a year. In line with the concept of changing over to a green economy, the government has set a goal for expanding renewable energy to 3% of the total by 2020, to 10% by 2030, and to 50% by 2050, including wind, solar, hydro, and nuclear stations. Looking ahead, the 2020 development plan for alternative and renewable energy in Kazakhstan has been approved with venues, investors, and deadlines for the implementation of projects totaling at an aggregate capacity of 3,054.55 MW. Moreover, Kazakhstan has outlined clear development indicators for the renewable energy resources sector with a view to ensuring better planning for accounting and systems. Today, the electricity generated from renewable energy resources accounts for less than 1% of the total generation volume in 2015 (exclusive of hydroelectric power plants with capacity above 35MW). Overall, electricity generation from renewable energy resources in 2015 totaled 704 million kWh. It should be pointed out that Kazakhstan has just agreed to the use of renewable energy resources but that development horizons have been outlined, so the task of the Ministry of Energy is to enable Kazakhstan's switch to the green economy and integration of renewable energy resources into the national electrical grid.