The country produces about 1.5 million barrels of oil a day and over the next five years should double that tally.
Oil giants including Chevron, which generates about a third of its profits from Kazakhstan, will be massive beneficiaries.
If the Kazakhs achieve their ambition, at the current oil price of about $US100 a barrel, this translates to $US109 billion dollars a year in black gold.
What has this got to do with small listed Aussie companies, you might ask?
When you are small you try to latch on to such opportunities. One company having difficulties doing so, though, is Jupiter Energy (ASX:JPR) - a company this column has mentioned in the past that is very much at the speculative end of the spectrum.
At 60 cents a share, Jupiter's market cap is only $70 million. Its size goes some way to explaining why it has been having trouble getting a production licence for the field it has been exploring, which has at least 24 million barrels.
“It's a low-risk target, as low risk as they come, but the X-factor here is the production licence,” says Bell Potter's energy analyst Johan Hedstrom who has been on a Jupiter funded tour of the oil field.
Hedstrom's price target of $2.42 for Jupiter is based largely on the known reserves, but he estimates that there could be in excess of 50 million barrels in its field, which has four wells.
If you put a valuation of $US10 a barrel for oil in the ground, this is worth a cool $US500 million. Even if you take into account the 20 per cent of production the Kazakhstan government could take for one third of the current oil price, it's still massive.
Then, however, there's the regulatory difficulties that underscore the risk in this stock.
A key problem has been that in order to gain a production licence, Jupiter has needed the cooperation of its neighbour, a Chinese owned oil company.
“It has been clearly down the list of priorities for the Chinese and Jupiter has been trying, largely in vain, to get its attention,” says Hedstrom.
Despite these problems, it appears the company is making headway, according to its fast talking London based chairman, Geoff Gander, whose background is in finance:
“The end of September should see a trial production licence for one well, and then a month later we are confident of achieving another one.”
He believes that the field should go into production by the end of 2012.
Another factor is that the company is due to list on the UK's AIM market in October and raise between $30 million and $50 million.
But a big positive on this front (if not most others) is the presence of industry heavyweight Alastair Beardsall of the Waterford Group on Jupiter's board. Waterford has a 30 per cent stake.
In the end, it's a high risk stock in a high risk part of the world. Still, one could go to the races and blow it all in a day.
MACA v Decmil
Mining services companies have been hit hard during the recent downturn, but the results season shows that many are in rude health – both from a work in hand and balance sheet perspective.
Many on the smaller side have not been raising capital, but have been punished despite this.
Two stocks that delivered strong profit numbers and even stronger outlook statements are MACA – the re-named Mining and Civil Australia (ASX code MLD), and Decmil (DCG). Both have suffered share price declines and look very cheap, trading on single digit price-to-equity ratios, compared with the market average of about 10 times.
The former is a contract miner for mid-sized gold and iron ore companies, while the latter is involved in civil construction, providing camps for the workers of companies on giant mining sites, like Woodside's Pluto and Chevron's Gorgon gas projects.
Both have big pipelines of work available to them, running into the billions of dollars. The important difference is that there is no annuity stream with the work that Decmil does. It builds a camp once. In contrast, MACA provides expertise in an area that is needed throughout the life of the current projects in hand and beyond.
Your columnist knows which one he prefers.
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