BAKU, Azerbaijan, Oct.29
Trend:
As global demand for liquid hydrocarbons fell by almost 11 percent, Kazakhstan entered its deepest recession in two decades, Vice-Chairman of IHS Markit Daniel Yergin said, Trend reports referring to IHS Markit analysis.
According to Yergin, the global COVID-19 pandemic, which caused a massive economic downturn, leading to a five percent drop in global primary energy demand in 2020. At the same time, it is expected that in 2022 the demand for energy resources will recover to the levels of 2019, and then will grow at a moderate pace.
He noted that in the future, however, growing demand will increasingly be met from low-carbon or non-carbon sources as the global rate of decarbonization accelerates (compared to pre-pandemic projections) amid the drive towards zero carbon emissions.
“Although in the three decades since gaining independence, the economy of Kazakhstan has made significant progress along the path of development and diversification, hydrocarbons and other energy resources still occupy a central place in it,” he said.
“The oil and gas industry alone, together with related sectors (such as transportation, construction of production facilities and geology), provided 17 percent of the country's GDP in 2020. Oil also provides the bulk of export earnings and is the main source of Kazakhstan's state budget revenues. The development of the oil and gas industry has served and continues to serve as a guarantee of the country's well-being.
It stimulated economic activity, promoted job creation and generated income, which, since 1991, have played a fundamental role in strengthening Kazakhstan as an independent state, as well as in ensuring the growth of income and living standards of the country's population,” Yergin said.
Also, according to Vice-Chairman of IHS, among other things, this contributed to the strengthening of relations between Kazakhstan and its neighbors and made the country a major figure in the global oil industry, as well as a significant participant in global markets, the world community and international events. On the other hand, this importance of the oil and gas industry increases the vulnerability of the national economy to external shocks.
"In 2020, this was once again - very painful - confirmed by the COVID-19 pandemic. As global demand for liquid hydrocarbons fell by almost 11 percent, Kazakhstan entered its deepest recession in two decades, with the country's GDP falling 2.6 percent. The reason was the decline in oil prices and weak demand for hydrocarbon exports. And the impact of lockdowns on domestic economic activity only exacerbated the problem," said Yergin.
“At the same time, the situation is ambiguous. Given the importance of energy in Kazakhstan's economy, revenues from the export of hydrocarbons and other energy resources will be extremely important for diversification initiatives and for financing the country's transition to low-carbon energy in the future. Nonetheless, international hydrocarbon markets will undergo significant changes as the global energy transition continues to gain momentum," he noted. And it is clear that Kazakhstan will face growing competition for limited foreign investment around the world (including from other major hydrocarbon producers). Investor companies will continue to consider new opportunities, but now they are much more selective in their choice of new projects, and it will be more difficult for countries with resources to compete for affordable investments. In the current situation, it is important for the authorities of Kazakhstan to adhere to a well-thought-out fiscal policy and take other effective measures to demonstrate that the country has “profitable” resources - oil and gas reserves, the development, production and transportation of which is possible at a relatively low cost and with an insignificant carbon footprint.”
Yergin added that a predictable regulatory environment and timely decision-making are equally important factors.
“It is these criteria that will play a major role in the selection of objects for investment by international companies. Despite a general increase in concern, the current pandemic has led to the emergence of fruitful new mechanisms for international cooperation. The OPEC + Mega Deal, struck in April 2020, aimed at curbing production in response to a collapse in global oil demand, marked the largest crude oil production cut ever orchestrated,” he said.
Vice-Chairman of IHS Markit also said that it helped to successfully stabilize world markets, as a result of which oil prices rose again from very low levels (and with them the income of oil exporters rose), adding that Kazakhstan plays a significant role in the alliance's actions to balance global supply and demand.