Power sector is one of the most attractive sectors of Kazakhstan economy for Chinese investors. The volume of investments from China to this sphere has already exceeded 25 billion dollars in the last 17 years. China is interested not only in petroleum and gas projects, but also in renewable energy, which is of special interest to Kazakhstan.
Where do Chinese investors invest money in Kazakhstan? According to the website China Global Investment Tracker, China has major investments (over 100 million dollars) in various countries of the world. According to the source, China has invested 36.7 billion dollars in the economy of Kazakhstan in the last 17 years. Two-thirds of it, or 25.2 billion dollars, were invested in the power sector. Chinese investors have spent just over 4.4 billion dollars for chemical industry, petroleum refining projects.
There are several historical deals among 15 major deals both in the volume of investments and in their strategic importance. These are purchases of 8 per cent of shares in the ‘petroleum pearl of Kazakhstan’ – Kashagan, and 67 per cent in ‘PetroKazakhstan’ that develops fields in the west of Kazakhstan, by China National Petroleum Corp. (CNPC). The total amount of the two deals exceeds 9.2 billion dollars. Chinese investors invested over 6 billion dollars in various gas projects.
“China is one of the most significant partners of Kazakhstan in the power sector at this stage. This is not so much because China is the major investor in the petroleum and gas sector, but because Chinese transnational companies (TNCs) invest in various spheres of the power sector – petroleum, gas, coal, renewable sources. In particular, China implements a range of projects in nuclear power, builds wind and solar plants, and also introduces its advanced technologies to hydropower industry,” said Ruslan Izimov, chief of the Centre for Chinese and Central Asian Studies ‘Sinopsis’ (Kazakhstan), to CABAR.asia.
According to the sinologist, the investment dependence of Kazakhstan on China does exist. And it’s not only in the power sector. China’s significance for Kazakhstan cannot be overstated. But the point is how attractive Central Asian states, particularly Kazakhstan, are for China.
“The share of regional countries in the energy imports of China does not exceed 4 per cent. Therefore, it is rather a strategic move for China to invest in the power sector of Central Asia in order to establish more effective overland transport corridors linking China and Europe. Amid tense relationships between China and the United States, the importance of Central Asian resources increases amid tense relationships between China and the United States,” said Ruslan Izimov.
‘Petroleum’ interest of China
According to Abzal Narymbetov, business analyst, member of the global non-profit professional society of petroleum evaluation engineers (SPEE) of Kazakhstan, it is absolutely wrong to use the concept of ‘Chinese petroleum expansion’, when the total share of the country in the petroleum production of Kazakhstan is nearly 15 per cent.
“There are people who escalate the situation by fuelling sinophobia, which exists in our society. But let’s look straight at the facts. USA (31 per cent) and our national company ‘KazMunaiGaz’ (31 per cent) have the biggest share in petroleum production in Kazakhstan, followed by the European countries with the combined share 17 per cent in the third place, and China. Russia (3.5 per cent) is well behind on the list of investors. If we look at the reserves data, American and European partners top the list. They develop large fields: Tengiz, Kashagan, Karachaganak,” said Abzal Narymbetov to CABAR.asia.
As to China’s assets, they are far from being the most attractive fields in petroleum production. Fields developed by CNPC are mature fields with decreased production, and they require more money for infrastructure and production. Therefore, China’s share decreases every year.
“China has its own political and economic strategy. Major contracts with American and European partners will expire in 2033-2041. China will probably wait and may pursue a different investment policy in Kazakhstan after 2030. Tengiz and Kashagan are definitely very promising assets that will continue to develop and produce,” the speaker said.
Kazakhstan is also of interest to the government of China as a logistic partner that allows it to transfer petroleum and gas from other countries via its territory. This is clearly shown by infrastructure projects of previous years and agreements on expanding capacities in the near future. Agreements between CNPC, ‘KazMunaiGaz’ and ‘QazaqGaz’ on expansion of ‘Kazakhstan-China’ pipeline in the section ‘Kenkiyak-Atyrau’ and construction of the second string of the gas pipeline ‘Beineu-Bozoi-Shymkent’ were signed during the state visit of President of Kazakhstan Kasym-Zhomart Tokayev to China.
Just a reminder that Chinese companies built the pipeline ‘Beineu-Bozoi-Shymkent’ in Kazakhstan that helped the republic solve the problem of domestic gas supply to the south of the country. Kazakhstan, in turn, promised to export 10 billion cubic metres of gas per year to China.
“Now we do not fulfil our obligations regarding gas supplies to China because we simply do not have enough gas. Domestic gas consumption increases and little gas is left for export. Initially, when those agreements were signed 5-10 years ago (in the time of Nursultan Nazarbayev – Editor’s note), they did not take into account such a large increase in domestic consumption. Of course, China is aware of our situation. In my opinion, time will come and we will have to meet the conditions of our bilateral agreement,” the petroleum expert said.
According to Abzal Narymbetov, Kazakhstan benefits from the petroleum and gas pipelines laid across our country, which deliver Russian petroleum or Turkmen gas to China. First, it makes Kazakhstan an important logistic partner, whose interests must be taken into account. Second, the budget receives funds paid for the transit.
Not by petroleum alone
As seen in the structure of exports of raw materials, China is not the main importer for Kazakhstan. According to the Bureau for National Statistics of the Republic of Kazakhstan, the country exported 35.9 million tonnes of petroleum in the first six months, including only 2.7 million tonnes, or 7.4 per cent, to China. European countries, which received 64.6 per cent of total volume, were the major buyers. China has even smaller proportions in petroleum gas exports – only 2.1 per cent, and coal exports – 2.7 per cent. Leading importers in these categories are Central Asian states and Russia.
In addition to petroleum projects, China has major investment projects in the nuclear industry of Kazakhstan. In 2021, Chinese company China General Nuclear acquired 49 per cent of shares in the subsidiary of ‘Kazatomprom’ – ‘Ulba-TVS’ company. Now eastern neighbours not only take part in uranium recovery and processing, but also buy uranium tablets in Kazakhstan and have even created production of fuel assemblies in the country.
The joint Kazakhstan-China enterprise ‘Ulba-TVS’ based in Ust-Kamenogorsk (East Kazakhstan region) began to produce special structures for the nuclear power plant filled with nuclear fuel made in Kazakhstan at the end of last year. Kazatomprom’s subsidiary – Ulba Metallurgical Plant – became the base of the company.
As to Kazakhstan power sector, China does not have any significant influence in it, according to Zhakyp Hairushev, an honoured power engineer of Kazakhstan, member of the social council of the Ministry of Energy of the Republic of Kazakhstan, author of the specialised Telegram channel Hairyshev energy.
“If we look at the structure of ownership of power sector assets involved both in production and transmission, we’ll see no Chinese businesses there. The situation is slightly different if we focus on renewable energy among power-producing organisations. Several Chinese investors have come to Kazakhstan and started to build solar and wind power plants. But as long as the share of renewable energy sources in the power balance is as little as 4.5 per cent, there will be no serious influence here,” Zhakyp Hairushev said.
The situation will be different when a wind park with total power of 1 GW is built in Kazakhstan. The share of green energy will increase then. But there will be no Chinese influence there. According to the Ministry of Energy of the Republic of Kazakhstan, they consider an option of construction of a wind park in Zhetysu region by means of investors from the UAE, and they have an agreement with a French company on funding 60 per cent of the cost of construction of a large wind power plant in Zhambyl region.
“Like many other countries, Kazakhstan faces the problems of power shortage and reduction of emissions in coal-fired power plants. We have plans to solve these problems. In particular, we intend to use Chinese technologies and equipment to build the third and fourth power units of Ekibastuz GRES power plant. The project is already being implemented. Why did we choose China as a supplier? Because China provides top quality of contemporary technologies for coal-fired plants at best prices. We will buy equipment from them and it’s even possible that Chinese engineers will be involved in its installation,” the speaker said.
Concerns and new horizons
Speaking about the risks and opportunities of Chinese investments for the economy of Kazakhstan, Ruslan Izimov, director of the Centre for Chinese and Central Asian Studies ‘Sinopsis’, paid attention to a rapid increase in China’s share in the uranium sector of Kazakhstan. And that’s where high dependence on China and Chinese investments may create certain risks. By the way, speaking about risks, the question of construction of a nuclear power plant remains open in Kazakhstan. In particular, China is likely to build the nuclear power plant in Kazakhstan.
“When strengthening ties with China, we should always keep in mind that rapprochement comes with a price and consequences. We should remember that China today opposes the United States in the global arena. If Beijing tried to adapt to the existing world order in previous years, now it is quite obvious that China will create the alternative world order to the existing one. In fact, we are entering the bipolar world today, where the United States remain the hegemonic power, and China is a full-fledged ‘power centre. Such medium-sized and small countries as Kazakhstan and Central Asia republics are in-between these poles,” the sinologist said.
In this situation, according to the expert, a multi-vector balanced course could be the most effective one in the foreign economic policy. It is being pursued by Kazakhstan. If Kazakhstan may collaborate with all parties concerned in economy, it must consider carefully its political relationships. In this context, Kazakhstan still has room for manoeuvre.