Skip to Content

Kazakhstan Takes Another Economic Hit As Coronavirus Infects Oil Fields, Copper Mines

Closed
by June 3, 2020 Market

Kazakhstan is experiencing a double attack as the coronavirus spreads and world prices fall for oil — one of the country’s most important exports.

Already struggling to cope with massive revenue losses due to the collapse of international oil markets, the Kazakh government’s bad economic situation is being exacerbated by an outbreak of COVID-19 cases at major oil fields and mines.

Bloomberg reported on May 27 that Chevron Corp, the main stakeholder in the Tenghiz oil-field project, announced it was sending home two-thirds of its workers at the site.

Tenghiz is Kazakhstan’s biggest onshore oil field, with estimated reserves of some 25 billion barrels and total recoverable reserves at somewhere between 6 billion to 9 billion barrels.

The operations at Tenghiz account for about one-third of Kazakhstan’s oil output.

Oil officials hope the major reduction in its workforce will stop the virus from spreading and keep the lucrative site from shutting down.

Tenghiz appears to be an epicenter of the coronavirus in Kazakhstan, with nearly 950 cases reported among workers at the site as of May 20. That was more than 10 percent of all the registered coronavirus cases in Kazakhstan on that day.

On May 25, the public-relations manager at TengizChevroil, Rzabek Artygaliev, said some 18,500 of the company’s workers and contracting organizations had been evacuated from the fields.

“Infection spreads very quickly where there are a lot of people,” Artygaliev explained. “Therefore, it was necessary to reduce the number of people at the field.”

The TengizChevroil consortium — Chevron Corp, ExxonMobil Kazakhstan, Russia’s LUKoil, and Kazakhstan’s state-owned KazMunaiGaz — released a statement a week before saying that “production continues uninterrupted and we remain focused on maintaining safe and reliable operations.”

Copper Closure?

Kazakhmys — which is owned by Vladimir Kim, a close friend of Kazakhstan’s first president, Nursultan Nazarbaev — is Kazakhstan’s largest copper producer and one of the largest in the world.

The company works in the central Qaraghandy Province, where it also has coal mines and operates several power stations, including a hydropower and a solar power station, according to the company. It also employs 46,000 people.

Kazakhmys said it recorded its first coronavirus case at a mining site on May 6. How long production will be allowed to continue there is unclear, as mining sites in various countries have been hit really hard by COVID-19 outbreaks.

Kazakhstan’s chief hygienist, Aizhan Yesmagambetova, spoke on May 20 about the outbreak at the Tenghiz site and other oil and mining areas around Kazakhstan. She said if the infection rates continued to grow, the government might have to order a halt to operations.

“The number of [coronavirus] cases at Tenghiz has grown to 935, in Shymkent at PetroKazakhstan there are 101 cases, and among contractors [for the site] 23 cases, and 69 cases among contact groups,” Yesmagambetova said. “In Qaraghandy Province there are 34 cases at the Kazakhmys mine.”

Added together that would be 1,162 cases at those three sites on the same day that Kazakhstan’s Tengrinews.kz website also reported there were a total of 6,969 cases in Kazakhstan.

A week later, on May 27, Health Minister Yerlan Birtanov gave an online press briefing about the spread of the coronavirus in Kazakhstan and said there were at that time 1,063 cases at Tenghiz, 219 cases at PetroKazakhstan, and 350 at mining sites in Qaraghandy Province.

Birtanov added that there were 80 cases registered among workers at construction sites in Nur-Sultan and in Turkestan Province, where Shymkent is located, and about as many cases at military bases in the Zhambyl and Aqtobe provinces.

The Health Ministry reported earlier that day that there were 9,304 cases nationwide.

State health officials and management at these sites realize much of the problem stems from the onsite living areas at the oil and gas fields and at mining operations across the country.

The companies operating the oil fields and the mines in Qaraghandy have vowed to implement a series of measures to prevent the virus from spreading further, such as the creation of “pods,” or teams that would live onsite in small groups that were sufficiently separated from each other to limit contact.

Kazakhmys said it was temporarily halting production work at its Nurkazgan mine except for repair and maintenance work “carried out by 100 people per shift,” all of whom would be regularly tested.

PetroKazakhstan, a Canadian-based company, has also vowed to boost measures to prevent the spread of the virus but a post on the company’s website from May 21 provided only rudimentary measures, such as using disinfectant or washing hands for 20 to 30 seconds, covering the mouth and nose when coughing, not touching the face, not spitting in public areas, etc.

Taking Another Hit

While government warnings about shutting down operations at sites where the spread of the coronavirus appears to be out of control are prudent, the authorities will be hard pressed to actually take such measures.

The Tenghiz oil field produced some 29.79 million tons of oil in 2019, a year when Kazakhstan’s total production was 90.4 million tons.

And the Karachaganak gas-condensate field in West Kazakhstan Province that produced some 11.27 million tons last year just reported its first coronavirus case on May 26.

But authorities in West Kazakhstan Province, and in Atyrau Province, where the Tenghiz oil field is located, are easing the province-wide quarantine there as of June 1.

Kazakh authorities have known for weeks that 2020 would be a difficult year for the country. The announcement of the first cases of the coronavirus in Kazakhstan came about one week after the price of oil nosedived on global markets.

The price of oil might be low, but Kazakhstan has no choice but to keep pumping it out. The price of copper is slightly down on world markets, but Kazakhstan has no choice but to continue mining it.

A suspension of work at any of the major oil fields or major copper mines would represent an additional loss of revenue the state can ill afford at the moment.

At the same time, the Kazakh government cannot afford to have recurrent outbreaks at work sites that threaten to spread to local populations.

As of June 2, Kazakhstan had reported 11,571 coronavirus infections but just 44 deaths, a number that has been widely scrutinized by observers as vastly underreported.

 

 

Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036

Previous
Next