CITY ON A FIELD

Kazakhstan 2018 | ENERGY & MINING | FOCUS: ATYRAU

Behind the attention set on the city centers of Astana and Almaty, a third city is quietly powering Kazakhstan's oil and gas sector while creating knock-on effects in several other industries.

Regardless of all the New Silk Road-related projects near the border with China and the surge in real estate developments in the capital of Astana, no rgion in Kazakhstan is experiencing such hype in activity this year as the coastal town of Atyrau.

Located on the shores of the Caspian Sea in the west of the country, Atyrau is fast-emerging as a key business hub, attracting major global oil and gas players, as well as local entrepreneurs, industrialists, suppliers, and logistics providers, all eager to capitalize on the city's newfound, seemingly endless opportunities.
Atyrau, known as Guryev until Kazakhstan gained independence in 1991, first struck black gold in 1979 when one of the largest oil discoveries in modern history was made some 100 miles south in the Tengiz reservoir. With a surface area four times the size of Paris, Tengiz is considered the biggest single-trap producing reservoir in existence and the world's deepest producing supergiant oil field. Its total oil reserves are estimated at a staggering 25 billion barrels, while a further 1.6 billion barrels have been located in the nearby Korolev field.
In 1993, Kazakhstan signed a 40-year partnership agreement to form Tengizchevroil (TCO), which today consists of US giants Chevron (50%) and ExxonMobil (25%), as well as local producer KazMunayGas (20%) and Moscow-based Lukoil (5%). Over the past 25 years, TCO has boosted output at Tengiz 10-fold, from around 28 million barrels a year to approximately 230 million barrels last year, investing around USD20 billion in goods and services.
The financial impact on Atyrau, and the entire western region of Kazakhstan, has been groundbreaking. Since 1993, TCO alone has pumped over USD112 billion into local entities, including Kazakhstani employees' salaries, purchases of local goods and services, profit distributions to Kazakhstani shareholders, and taxes paid to the government. Furthermore, leveraging its proximity to the country's other two major reserves, the Kashagan oil field and Karachaganak gas condensate field, Atyrau has successfully lured major international energy services providers, such as Schlumburger and Agip, to set-up their country offices in the city.
Yet, the brightest spark emerging out of Atyrau lies, in fact, in its future. In July 2016, TCO's main shareholder Chevron announced the development of its Future Growth and Wellhead Pressure Management Project (FGP-WPMP), which will see Tengiz expand its total output by 260,000 barrels per day, or 44%. The project is expected to inject a further USD37 billion into the region, which includes over USD27 billion for facilities, USD6.2 billion for contingency and escalation, and USD3.5 billion for wells. The expansion, which also represents the biggest private sector investment in the global oil industry this decade, is scheduled for completion in 2022.
In an interview with TBY, Country Manager of Istanbul-based contractor Entegre Satek, Selim Karakulah explained, “the development at the Tengiz field to be one of the largest upcoming projects, and I expect all the large construction companies to be involved there." Indeed, through conducting interviews with all the leading players in Kazakhstan's business landscape, TBY can confirm that the vast majority of contractors, manufacturers, suppliers and energy-related service providers do in fact view Tengiz as the golden opportunity to be seized, while a number of interviewees have secured agreements with TCO over the past 12 months.
The development's windfall for Atyrau is expectedly immense. According to the Ministry of Labour and Social Protection, TCO's expansion is expected to create over 20,000 industry-related jobs locally. Moreover, in order to accommodate this surge, as well as Atyrau's undeniably growing internationalization, city officials have outlined a scheme to drastically improve its infrastructure. Expecting the territory of the city to triple by 2030, a development master plan has been devised to build 45 new schools, 83 kindergartens, and five outpatient clinics in the coming years.