Kazakhstan is among the world’s leading non-OPEC oil suppliers, holding about 3% of the world’s proven oil reserves and nearly 2% of global crude output. Its oil exports via the Caspian Pipeline Consortium (CPC) are vital for Europe's energy supply, and it regularly supplies naphtha-rich crude feedstock to the Asian petrochemical industry. As the oil sector looks to the country’s 2026 production forecast, it must take into account evolving OPEC+ quotas, ongoing fiscal reforms and adjustments to agreements with IOCs.
Kazakhstan’s budget and policy documents envisage a technical output capacity of 2m b/d in 2026. The chairman of Kazakhstan’s state-owned oil and gas company, KazMunayGas (KMG), Askhat Khassenov, informed the audience at Kazakhstan Energy Week in October 2025 that this production level can be maintained for “a long time”. However, Kazakhstan’s energy minister, Yerlan Akkenzhenov announced that the country aims to produce around 1.8m b/d of oil in 2026. He attributed the lower figure to turnarounds at key fields, stating that repairs at Tengiz, Karachaganak and Kashagan could impact overall production.
The IEA is also less optimistic, revising down its forecast for Kazakh oil production in 2026 by 100,000b/d, to 1.7m b/d. Despite these challenges, the $48b+ Future Growth Project (FGP) at Tengiz is expected to increase capacity by 240,000b/d, exceeding previous annual averages. Supported by international partners, consortium Tengizchevroil (TCO) aims to reach a total capacity of around 1m boe.
The North Caspian Operating Company (NCOC) is advancing phase 2 growth projects at Kashagan, with 2A (planned for 2024–26) targeting 500,000b/d and 2B (progressing over 2025–31) approximately 710,000b/d. The Karachaganak Petroleum Operating (KPO) consortium is prioritising debottlenecking and gas-handling upgrades. Collectively, these projects and onshore assets are expected to sustain output capacity above 2m b/d in the medium term.
Kazakhstan remains a crucial investment destination for global energy companies. Its upstream sector is attractive due to substantial remaining reserves, especially at Kashagan, with recoverable crude oil estimated at 9–13b bl, making it one of Eurasia’s largest fields. KMG reports several hundred million tonnes of prospective resources in its exploration portfolio. Greenfield investment risk is relatively low because of access to export pipelines and processing facilities. Consortium partners operating within the country often integrate local supply chains, thereby increasing capacity and reducing fluctuations in operating costs.
The ‘big three’ projects
Three major IOC consortiums dominate the oil production scene. Chevron (50%), ExxonMobil (25%), KMG (20%), and Russia’s Lukoil (5%) are the principal stakeholders in Tengizchevroil, which oversees the Tengiz and Korolev fields. Shareholders in NCOC, responsible for the offshore Kashagan field under a production-sharing agreement (PSA) until 2041, include KMG Kashagan (16.877%), Shell Kazakhstan Development (16.807%), Total EP Kazakhstan (16.807%), AgipCaspian Sea (16.807%), ExxonMobil Kazakhstan (16.807%), CNPC Kazakhstan (8.333%), and Inpex NorthCaspian Sea (7.563%).
KPO is operated by an international consortium under a Final PSA, valid until 2038, with a joint investment and cost-sharing arrangement within a PSA framework. Its shareholders are Shell (29.25%), Italy’s Eni (29.25%), Chevron (18%), Lukoil (13.5%), and KMG (10%). Other notable stakeholders in Kazakhstan include China’s CNPC (Kashagan), TotalEnergies (Kashagan), and state-controlled PetroChina, which acquired PetroKazakhstan's assets.
The fiscal pivot
Kazakhstan’s oil industry has traditionally been governed by a complex tax system designed to balance government revenue needs with sector investment incentives. The primary component is the Mineral Extraction Tax (MET), which depends on both the volume of oil produced and the characteristics of individual fields, such as their size and current oil prices. This ensures that fiscal obligations are aligned with the scale of production and prevailing market conditions.
In addition to extraction-related levies, the Excess Profit Tax (EPT) is another important element of the sector’s fiscal framework. The EPT is a progressive tax based on the profits of oil and gas producers, with rates ranging from 10% to 60%. This framework aims to ensure that windfall profits are shared with the state, especially when profits are high.
Certain subsoil users are also required to make payments to recover historical costs related to field development. For operations in the Caspian Sea region or targeting deeply folded oilfields, an alternative subsoil use tax applies, recognising the unique technical and geological challenges of these projects. Export rental taxes are specifically levied on crude oil exports, thereby imposing an additional layer of fiscal obligations on producers operating in international markets.
Starting in January 2026, the sector has been governed by the new Expanded Subsoil Use Tax (ASUT). This modern fiscal mechanism aims to simplify processes and encourage investment in mature oil fields and in technically challenging projects. Rates under ASUT depend on global oil prices, with lower bands applying to offshore projects with complex geology. A key feature of the ASUT is that any tax savings must be reinvested into production activities, infrastructure upgrades, research and development or regional development initiatives. Tax savings cannot be distributed as dividends, indicating that fiscal relief is contingent on capital expenditure and operational improvements in Kazakhstan’s oil sector.
While Kazakhstan’s new tax regime provides some relief, the oil sector continues to face several challenges. The IEA’s recently revised assessment and the energy ministry’s lower forecast for Kazakh oil production highlight ongoing operational issues, including storage capacity limitations and the vulnerability of the national grid to power disruptions. For instance, in January 2026, a fire and subsequent power outage at the Tengiz field caused a brief but significant shutdown, emphasising the fragility of advanced production facilities.
The export bottleneck
The most significant challenge facing Kazakhstan today is its reliance on Russian infrastructure for exports. The CPC pipeline crosses Russia to reach the Black Sea. Frequent disruptions caused by Ukrainian drone strikes, the threat of sanctions spreading and political tensions with Moscow, continue to create structural vulnerabilities. In the first half of January 2026, damage to single-point moorings and weather-related shutdowns forced CPC to operate at reduced capacity.
KMG rerouted around 70,000b/d of crude in December 2025 through KazTransOil’s system to Germany’s Schwedt refinery and to China via the Atasu–Alashankou route, and the situation is ongoing in early 2026. Flows via the Baku-Tbilisi-Ceyhan (BTC) pipeline were 26,000b/d in 2025 and may reach 44,000b/d by the end of 2026. However, the total capacity of alternative routes is only about half of CPC’s, meaning prolonged constraints on CPC will fundamentally limit output and are expected to continue over the next few years.
OPEC+ compliance: structural tensions
Despite technical and logistical challenges, Kazakhstan’s dedication to the OPEC+ production mechanism remains central to its output policy. In recent years, the country has struggled to meet its output-reduction targets, primarily due to the technical challenges of shutting in wells in its high-pressure fields.
In early 2026, Kazakhstan joined key OPEC and OPEC+ members of the Declaration of Cooperation (DOC) to pause planned oil production increases for the first quarter, citing seasonal demand fluctuations and the need to sustain market stability. However, the Joint Ministerial Monitoring Committee requires Kazakhstan to continue implementing its compensation plan to offset overproduction for 2024–25.
Some turnaround activities at key fields might help the country meet its commitment to the OPEC+ target this year. Nonetheless, a structural tension persists from an IOC perspective, as capital has already been invested in expansions, while OPEC+ policies and export constraints restrict the ability to maintain plateau production.
Transformation ahead
Kazakhstan is preparing for a significant transformation across its entire value chain. The government plans to more than double refining capacity to 800,000b/d by 2030 from around 370,000b/d at present, including a newly announced $10b refinery, signalling a strategic move towards exporting higher-value refined products. Investments in petrochemical and chemical projects, such as urea and potassium chloride plants, complement this effort. In the upstream sector, policies will continue to focus on deepwater exploration in the Caspian Sea and the revitalisation of mature onshore fields in regions such as Mangystau, employing digital twin technologies and enhanced oil recovery methods.
Despite the legal, fiscal and infrastructural challenges, recent reforms are establishing the foundation for more sustainable, state-led management of Kazakhstan’s substantial hydrocarbon resource base in the coming years. The extent to which the country can balance its long-term capacity goals with OPEC+ discipline and export infrastructure limitations will determine how swiftly it can realise that potential.
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