Qazaqgaz, the Kazakh state-owned gas pipeline operator with ambitious plans to become a major gas producer, said it hopes to find potential partners in the Middle East for domestic natural gas developments.

According to statements from the company, Qazaqgaz has signed memoranda of cooperation with two United Arab Emirates-based companies, Petromal and Dragon Oil, seeking their participation in Qazaqgaz-led exploration and development of new gas assets in Kazakhstan.

The memorandum with Petromal also calls for the companies to consider jointly building a gas processing plant in the country.

Petromal is an oil and gas production arm of UAE’s privately owned National Holding that also operates ventures in real estate, industrial products, food and agricultural products, and trading and retail.

According to the company, Petromal holds interests in unidentified producing concessions in West Africa and pursues interests in hydrocarbon projects in West Africa and Central Asia. It is also involved in the provision of oilfield, engineering, procurement and contracting services.

However, Petromal’s page on a professional social network says that the company employs just between 10 and 50 people.

In contrast, Dragon Oil since 2000 has been operating a major offshore gas development project in Turkmenistan’s sector of the Caspian Sea when the company signed a production sharing agreement for the Cheleken licence area with the host government.

A wholly owned subsidiary of Emirates National Oil Company, Dragon Oil also holds interests in exploration blocks in Iraq, Algeria, Tunisia and Afghanistan; and recently reported a major discovery offshore Egypt.

Though Kazakhstan exports over 80% of its oil production because domestic demand for the fuel has remained stable for years, Qazaqgaz expects to see a shortage of natural gas for domestic consumers as early as next year, the company’s executive board chairman Sanzhar Zharkeshov recently said.

Authorities in Kazakhstan have to honour commitments to foreign-led production sharing projects in the country to allow them to export their gas output, rather than sell it in the domestic market at a government-regulated price.

Russian gas alliance proposals

According to suggestions in Moscow, executive board chairman of Russian gas giant Gazprom, Alexei Miller, is scheduled to visit Astana later this week to hold talks with the Kazakh Energy Ministry and Qazaqgaz.

Miller is expected to offer the Astana administration Russian gas imports to the northern part of Kazakhstan where the demand deficit is most acute.

Kazakh authorities have provided no clear answer to last year’s pronouncements from Moscow, calling for Russia, Kazakhstan and Uzbekistan to form a regional gas production alliance.

The proposal is believed to be a part of the Kremlin’s efforts to grow its influence in former Soviet countries in Central Asia.

Though Gazprom already has strong foothold in Uzbekistan, the company’s exposure to gas developments in Kazakhstan has been very limited, as Astana traditionally leaned towards western oil majors — although their interest in oil and gas green field developments in this country has weakened recently with their transition into renewable energy.

Karachaganak bottleneck

Kazakh Energy Ministry officials recently criticised Russian gas giant Gazprom for failing to honour in full the gas and condensate processing needs of the country’s third largest producer, Karachaganak, at a Gazprom-operated gas processing plant, located across the Russian-Kazakh border near the Russian city of Orenburg.

Under a long-term contract between Gazprom, the Orenburg plant removes off-spec content from hydrocarbons produced at the Karachaganak field, with gas and condensate confirming to market specifications being returned back to Kazakhstan after processing.

According to Kazakh news portal NewsHub, that prompted authorities to open discussions with Karachaganak's foreign shareholders — Eni, Shell, Chevron and Lukoil — on the construction of its own processing plant to reduce the project’s dependence on the Orenburg facility despite the expected high cost of such a facility.