azakhstan has proven natural gas reserves of 65-70 trillion cubic feet (Tcf), the sixteenth top endowment in the world. Production is concentrated at oilfields like Tengiz, Tenge, Tolkyn, Karachaganak, Zhanazhol and Amangeldy. So far, most of the 113 sites with proven reserves are small. The commercial approach for the three main gas producers, Karachaganak Petroleum, TengizChevroil and UzenMunaiGaz, is to capture the fuel in clusters. In a few years, geologists will have more data about reserves in the Caspian offshore. The new finds are expected to double reserves.

Meanwhile, far in the steppe, a chance visitor might bump into a blue compressor station of KazTransGas. The stations compress natural gas so they can be loaded onto hi-tech containers made in the U.S. From there they are dragged to remote settlements where the fuel is used for heating. Employees at KazTransGas carry out two-week rotations in places where temperatures in winter can often drop below 40 degrees celsius. In this part of Kazakhstan, working conditions are particularly difficult.

For a country so vast, though, the stations are a healthy symptom that policymakers are paying closer attention to the development of gas infrastructure. Globally, electricity plants are switching over to the cleaner-burning natural gas. The U.N. Kyoto Protocol, with its gradual carbon abatement program, is partially behind the trend. It has shifted the demand curve outward and led to the first natural gas scares. Last January, Russia turned off the spigots to Ukraine in what analysts qualified as a political ploy issued from the Kremlin. The effects of the crunch were felt as far as Austria.

SERIK SULTANGALIEV General Director KazTranGas INTERVIEW

Central Asia is growing increasingly inter-dependent and Kazakhstan, conscious of its landlocked position, has become a regional consensus builder. During the Soviet era, infrastructure projects were part of a grand design to create dependence across the different nationalities. Each republic played a specific role in advancing the economic machinery. For Serik Sultangaliev (INTERVIEW), General Director of KazTransGas, energy sovereignty is still an issue. “We have to stick together because we are united through pipelines that we commonly share,” he says.

As the main operator of gas trunk pipelines, KazTransGas is vital to Kazakh GDP. There are two main gas distribution networks in the country. One serves the oil-producing fields of the western regions. The southern pipeline extends deep into the high-consumption areas of Almaty. In the north, an export route leads to Russia’s region of Orenburg, where gas is sent to processing facilities. The only part left out of the scheme is the industrial belt outside of Shymkent, a growth area for the manufacturing sector. Amangeldy, an oilfield with associated gas developed by KazTransGas, has served to patch the shortfall.

“With the Amangeldy field, we are able to provide one-fourth of the natural gas formerly sourced from Uzbekistan,” says Mr. Sultangaliev. Despite its own sizeable reserves, Kazakhstan was a net gas importer for much of the 1990s. The trend was reversed only two years ago when net exports reached 40 Tcf. KazTransGas now generates revenue by charging tariffs to Russia’s Gazprom for the transit of Uzbek and Turkmen gas. The fee for gas transit has been fixed at $1.10 per 1,000 cubic meters of gas over 100 kilometers.

The future of KazTransGas is the diversification of activities, and marketing its own gas at Amangeldy is a first step. KazTransGas is also expanding into the hydroelectric sector. It acquired the Aktobe station last year and has been active at Dzhambul, one of the largest hydroelectric plants in the country. In 2005, the company also took over management at Almaty Power Consolidated (APC). For its new mandate, the company has decided to create a large holding structure.

In January, Mr. Sultangaliev announced the company would triple net profits in 2006. The source of growth will stem largely from the increase in transportation tariffs charged to Gazprom. “For the first time, we were able to defend our tariff hikes. It’s difficult to prove to Gazprom that there is a need for that, but we did it at the highest level. It was our first victory,” says Mr. Sultangaliev.