News roundup: Kazakhstan

Even when oil prices were at their highest, Kazakhstan’s government was insistent on the need to diversify its economy away from the resource, with construction growth to play a key role. Now that the price of a barrel has halved, this strategy will be tested – and the building industry looks to be holding up well so far in 2015. The first two months of the year have been encouraging for Kazakhstan’s builders, with growth in residential and general construction and some interesting new projects announced. Here is a roundup of what’s been happening in the sector.

 

A good start to the year for house builders – construction and sales up, but price rises cool

2015 has been a good year for Kazakhstan’s house builders – Kazakhstan’s state statistical service has announced a 14.6% increase in housebuilding in January and February 2015 compared to the first two months of last year. 1.3 million sqm of housing has been built this year so far, with Astana and Almaty, Kazakhstan’s two largest cities, accounting for over 41% of the total. Astana in particular performed very well – 57% more housing was completed in the region compared to last year. The leading region for growth in housebuilding, however, was the Akmola region where 162,000 sqm was put up, an increase of 130% on the first two months of 2014. These two regions were the standout performers, but the sector grew all over the country – only four of Kazakhstan’s 16 regions saw a decrease in completed floor space.

Residential construction has also been on the agenda in eastern Kazakhstan, where a multi-storey apartment block has just been completed in the city of Semey near the Russian border, in a project initiated by the Kazakhstan Mortgage Company. The development contains 120 flats for rent, and it will be followed up by two more nine-storey residential buildings scheduled for completion this autumn.  All these projects fall under the 2020 Regional Development Programme, a scheme that will see over 480,000 sqm of housing built in Kazakhstan in 2015 alone.

On a less positive note for developers, the pace of house price increases in the country fell 6% in February this year. However, this has come at the same time as a rise in purchases – sales of new homes this year are 4.5% up compared to 2014, while the resale market is 6% larger.

 

What low oil price? Two major construction projects in the petroleum sector

A depressed oil price is hanging over Kazakhstan’s economy, but construction of facilities and plants in the sector is carrying on regardless. Kazakhstan entered the record books last week with the news that the first ever commercial gas-to-liquid plant, which will convert waste gas emitted in oil production to synthetic diesel fuel, will be built in the western Aktobe region by the British company CompactGTL. When construction is complete in early 2018, the plant will be able to treat over 300 million cubic metres of gas every year. Speaking about the deal, the executive secretary of Kazakhstan’s ministry of oil and gas Kanatbek Safinov said that “Kazakhstan is very interested in attracting innovative and high technology businesses” to speed up Kazakhstan’s development, and CompactGTL’s involvement is a great example of a foreign company succeeding in Kazakhstan.

Petroleum-related construction also made the headlines after Kazakhstan’s Ministry of Energy announced that it is ‘analysing the possibility’ of building a fourth oil refinery in the country. The project, estimated to cost up to $10 billion, has been on the cards for a while now – the country’s president Nursultan Nazarbayev earlier this year said it was ‘ridiculous’ that Kazakhstan suffered kerosene shortages thanks to its lack of refining capacity – and this latest announcement brings the project one step closer to reality. Should things move forward with the project, it would boost Kazakhstan’s specialised construction sector and ease the pressure on its overworked refineries.

 

General construction spending rises to $790 million in 2015

Another report from Kazakhstan’s statistical service has shown that 147 billion tenge ($790 million) was spent in the construction sector in January and February this year, a modest 1.1% rise on last year. Astana again made a strong contribution to the total, with a 53% increase in spending, and there were solid performances from the Atyrau and Mangystau regions in western Kazakhstan, where economic activity is healthy thanks to oil and gas production.

 

Almaty trims 2022 Winter Olympics budget, but confident of success

Officials in charge of Kazakhstan’s bid to host the 2022 Winter Olympics in Almaty, with Beijing the only other contestant city, have cut $500 million from the planned budget for the competition. Reductions in infrastructure costs account for around 80% of the changes, while repair and construction of the Shymbulak ski resort and the Tau Park snowboard centre will no longer take place. Nevertheless, Almaty’s builders will be hard at work if the bid comes in – plans include a brand new Olympic Park, a new sliding centre and Almaty Conference Centre, and extra hotels around the city.

The change in plan still leaves a budget of around $7 billion to get Astana ready to host the Games, and Kazakhstan’s bid team is confident of bringing the tournament to the mountains of Central Asia. “Our budget is efficient – not low, not high, but efficient. The compactness of our bid reduces transport and logistics costs,” Andrey Kryukov, vice-chairman of the Almaty 2022 bid team, told the BBC. All of Almaty’s facilities and venues for the Games would be within a 35-kilometre radius, in contrast to Beijing where separate events would be held up to 160 km apart.

The International Olympic Committee are certainly impressed with the efforts being made. After a five-day tour of the proposed venues, an International Olympic Committee (IOC) delegation talked up Almaty’s chances of hosting the Games. “Almaty has spectacular mountains, some very impressive venues and a real passion for winter sports. I can say that our visit has confirmed that Almaty is capable of holding a successful Games in 2022,” said the head of the delegation Alexander Zhukov.

The winning bid will be announced at the IOC annual meeting in Kuala Lumpur on 31 July this year. 

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