International Trade

Covering a territory of more than 1 million square miles, or about one-third of the continental United States, Kazakhstan, part of the former Soviet Union, is rich in oil, gas, and mineral deposits. The risk of disruption to Middle East oil production and the rising U.S. demand for foreign oil have spurred American interest in oil sources outside the Persian Gulf. This report provides information on Kazakhstan's potential as (1) a source of oil for the United States and (2) an investment opportunity for the U.S. petroleum industry and an export market for U.S. oil and gas equipment supplies. GAO also discusses Kazakhstan's oil and gas production, reserves, exports, and consumption; the possible pipeline routes for bringing Kazakhstan's oil to export markets; the factors encouraging and discouraging investment in Kazakhstan's petroleum sector; and the efforts of the U.S. government to support exports to and investment in Kazakhstan's petroleum sector and U.S. oil companies' responses to those efforts.

GAO found that: (1) Kazakhstan is unlikely to become a major oil source for the United States, since its oil production only accounts for 2 percent of world production; (2) Kazakhstan's oil production can potentially affect oil prices in the future; (3) Kazakhstan's oil reserves range from 3 billion to 16 billion barrels, which is 0.5 to 1.5 percent of the Persian Gulf's proven reserves; (4) Kazakhstan's consumption of crude oil has fluctuated over the past 8 years and its gas consumption, which is nearly double its gas production, has increased steadily since 1985; (5) Kazakhstan's potential status as an oil supplier is hampered by its need to route all of its pipelines through politically unstable areas; (6) other factors affecting Kazakhstan's potential as an oil supplier include its future oil consumption and how much oil it can produce from the unexplored region of the Caspian Sea; (7) Kazakhstan's large gas and oil fields and relatively stable government represent substantial investment and export opportunities for U.S. investors and equipment suppliers; (8) investment and export opportunities in Kazakhstan are hampered by logistics and Kazakhstan's status as a developing country; and (9) the U.S. embassy in Kazakhstan and other U.S. agencies have been helpful in assisting the U.S. oil industry to exploit Kazakhstan's potential, but some industry officials have encountered problems with the agencies, tax policy, export restrictions, administrative difficulties, and European intervention.