Kazakhstan Business & Economy - The Times Of Central Asia

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Oil

Kazakhstan’s Mini Oil Refineries Urge Government to Lift Export Ban on By-Products

Kazakhstan’s January ban on the export of naphtha, heating oil, and marine fuel should be reconsidered, as it threatens to shut down mini-oil refineries, Muratbek Makhanov, Managing Director of the Oil and Gas Sector and Ecology at the National Chamber of Entrepreneurs (Atameken) has warned. Since January 29, Kazakhstan has imposed an official ban on exporting gasoline, diesel fuel, and certain petroleum products, including to other Eurasian Economic Union (EAEU) member states. The restrictions cover by-products of mini-refineries such as naphtha, used as fuel for tractors, a gasoline additive, or a solvent in paint production, heating oil, and marine fuel. While Kazakhstan operates three major refineries, approximately 30 smaller facilities focus primarily on diesel production, which inevitably results in these by-products. The issue, industry representatives argue, is that these by-products have little domestic demand and are primarily sold for export. “The oil refining process makes it impossible to produce only diesel fuel. Other petroleum products, such as heating oil and naphtha, are unavoidable by-products that now fall under the export ban. Selling them domestically is not viable, which means we may have to suspend production entirely, leading to a diesel fuel shortage,” said Abdymanap Isabayev, a representative of one of Kazakhstan’s mini-refineries. Isabayev proposed maintaining the export ban on diesel fuel while lifting restrictions on by-products. His concerns were echoed by Atameken’s Makhanov. “Restrictions on the export of refined oil by-products, such as naphtha, heating oil, and marine fuel, harm not only the financial stability of mini-refineries but also Kazakhstan’s broader economy. The government must reconsider this ban and allow mini-refineries to export these products,” he said. Makhanov emphasized that selling surplus petroleum products abroad would generate additional export revenues, increasing budget inflows through customs duties, fees, and other charges. Amanbai Sembekuly, another mini-refinery representative, warned that shutting down small processing plants, which primarily refine crude from marginal and unprofitable fields, could also halt oil production at those sites. “This would be a significant loss to the national budget, which is already suffering from lower revenues due to the ban. The export customs duty on our high-sulphur oil products is 2.5 times higher than the duty on diesel fuel, so these restrictions are costing the government money,” Sembekuly said. Kazakhstani naphtha is primarily exported to Turkey, Uzbekistan, Italy, and Greece, where it is refined into diesel fuel. According to industry representatives, similar refining processes could take place within Kazakhstan’s major refineries, but this would require setting up additional processing lines. As The Times of Central Asia previously reported, Kazakh authorities announced at the end of January the liberalization of domestic oil product prices, abolishing 11 regulations that had controlled wholesale and retail fuel prices since 2014. The move is expected to address fuel shortages, which have worsened due to price disparities that drive fuel exports to neighboring markets.

Energy

Russia to Build Gas Pipeline for Northern Kazakhstan

Russia will construct a new trunk gas pipeline to supply fuel to the northern and northeastern regions of Kazakhstan. The decision was formalized in an order signed by the Russian government on February 18, which was published on the country’s official legal information portal. According to the document, the pipeline will have a design capacity of 10 billion cubic meters of gas per year, with compressor stations capable of generating 50 megawatts. The route will pass through Russia’s Tyumen region. Kazakhstan’s Gas Supply Strategy Kazakhstan’s Energy Minister Almasadam Satkaliyev had previously outlined two potential strategies for ensuring gas supplies to the country’s northern regions. The first option involved extending Gazprom's existing Saryarka pipeline project, which would supply Kazakh gas to northern Kazakhstan. The second option, now selected, is to import Russian gas through a newly built route. Strategic Importance of Gasification The issue of supplying gas to northern Kazakhstan was first raised by President Kassym-Jomart Tokayev in 2021. Tokayev emphasized that gasification of the Akmola and North Kazakhstan regions is a strategically important task. “This is a matter of national importance,” he said at the time, stressing that expanding gas infrastructure would not only strengthen the region’s industrial potential but also enhance its attractiveness for business and improve living conditions for local residents.

Energy

Ukrainian Drone Strike Disrupts Kazakhstan’s Oil Exports

On February 17, Ukrainian drones struck the Kropotkinskaya oil pumping station, a key component of the pipeline of the Caspian Pipeline Consortium (CPC) in Russia’s Krasnodar region. The CPC, a 1,500-kilometer pipeline, transports crude from Kazakhstan’s Tengiz field to the Black Sea port of Novorossiysk, a crucial hub for global exports. The attack, confirmed by CPC operators, resulted in the temporary shutdown of the Kropotkinskaya station, the largest such facility on Russian soil. No casualties or oil spills were reported. Ukrainian sources, including the Security Service of Ukraine (SBU) and Special Operations Forces (SOF), claimed responsibility, citing the pipeline’s role in supporting Russia’s military-industrial complex. The strike reportedly involved seven drones armed with high-explosive warheads, significantly damaging energy infrastructure, including a gas turbine unit and a substation. Russian authorities estimated a 30–40 percent reduction in CPC throughput for the next six to eight weeks, affecting global supply chains. While CPC pipeline operators have not disclosed a precise timeline for repairs, the anticipated disruptions will inevitably place additional pressure on global energy markets. The degree of damage inflicted raises questions about the vulnerability of Russian energy infrastructure and the efficacy of existing defense systems in preventing such attacks. The CPC pipeline handles a substantial share of Kazakhstan’s oil exports. In 2023, it transported 63.5 million tons, or approximately 1.27 million barrels per day (bpd), with 90 percent of that volume originating in Kazakhstan. This pipeline disruption translates into a projected drop in Kazakh oil flows from 1.143 million bpd to an estimated range of 0.69 to 0.80 million bpd. Consequently, Kazakhstan’s total crude exports—including volumes transported via alternative routes such as the Trans-Caspian corridor and rail—are expected to decline by up to 28.6 percent. The revenue impact could be severe given oil’s centrality to Kazakhstan’s economy. Even a short-term disruption will reverberate across multiple sectors, affecting fiscal revenues and potentially leading to a recalibration of investment strategies within the country’s energy sector. Although Kazakhstan has sought to diversify its oil export routes since 2022, alternatives remain limited. The Trans-Caspian International Transport Route (TITR), connecting Kazakhstan to Azerbaijan via the Caspian Sea and then onward through the Baku–Tbilisi–Ceyhan (BTC) pipeline, carried just 1.8 million tons in 2023. This is but a fraction of CPC’s capacity. Other options, such as the Druzhba pipeline to Europe and rail transport, are constrained by infrastructure bottlenecks and geopolitical risks. Given these constraints, Astana has increasingly prioritized the expansion of maritime oil exports, including investments in new tankers and port facilities. However, logistical challenges, cost considerations, and geopolitical uncertainties continue to complicate Kazakhstan’s ability to execute a seamless transition away from Russian transit routes. The attack underscores the vulnerability of Russia’s energy infrastructure amid the ongoing war. Unlike previous Ukrainian strikes targeting refineries and storage depots, this is a direct hit on a critical transit corridor with transnational implications. The disruption may accelerate Astana’s long-term push for diversification, including investment in new tankers and expanded partnerships with U.S. and European firms. In light of these developments, Kazakhstan...

Investments

Central Asia Receives Half of Eurasian Investments from China, Turkey, Iran, and Gulf States

The Eurasian Development Bank (EDB) has released a new study analyzing mutual direct investment (MDI) flows across the Eurasian region. The report examines investment trends between 13 Eurasian countries - Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan - and external partners, including China, Turkey, Iran, and the Gulf states, from 2016 to the first half of 2024. Key Findings on Investment Trends According to the EDB, total MDI stock in the region reached $90.4 billion by mid-2024, reflecting a 6.4% increase from 2023. China remains the largest investor in the Eurasian region, holding an MDI stock of $58.6 billion at the end of H1 2024, accounting for 64.8% of the total. Other major investors include: Turkey - $12.3 billion (13.6%) United Arab Emirates (UAE) - $12.2 billion (13.5%) Iran - $3.2 billion (3.5%) Saudi Arabia - $2.3 billion (2.5%) Qatar - $1.6 billion (1.8%) Among these, Iran showed the highest investment growth, doubling its investments since 2016, with 90% directed toward Azerbaijan. Turkey demonstrated broad sectoral diversification, while Saudi Arabia and Qatar emerged as new investors, making their first investments in 2021 and 2024, respectively. Investment Distribution in Eurasia The largest investment recipients in the Eurasian region include: Russia - $23.5 billion (26%) Turkmenistan - $17.5 billion (12.5%) Kazakhstan - $15.5 billion (11.1%) Mongolia - $10.3 billion (7.4%) Uzbekistan - $8.8 billion (6.3%) Central Asia received 51% of all investments from China, Turkey, Iran, and the Gulf states, totaling $46.2 billion, an increase of 25% since 2022. Outbound Investment from Eurasia The report also highlights outbound investments from the Eurasian region, which totaled $49.4 billion, doubling since 2016. Turkey received 80% of these investments, with a significant portion originating from Russia. Sectoral Trends: Energy, Manufacturing, and Greenfield Investments China continues to expand its investments in energy and manufacturing, although its traditional focus on extractive industries has declined. As of mid-2024, Chinese investment in mining and resource extraction stood at $36.2 billion, comprising 61.7% of its total investments in Eurasia. Other notable sectoral trends include: Energy sector - Chinese investment grew 2.1-fold in 18 months to $4.1 billion, with 85% directed toward Uzbekistan. Manufacturing sector - Investment increased 8% to $11.8 billion, with most projects concentrated in Central Asia. The Gulf states are also expanding their investments in the region: The UAE invested $12.2 billion, with 90% of its projects in Central Asia. Saudi Arabia increased investments from $300 million in 2021 to $2.3 billion in 2024, primarily in Uzbekistan’s power sector. Qatar made its first major investment in Kazakhstan in 2024, committing $1.6 billion to the telecom sector. Rise of Greenfield Investments Greenfield projects - new businesses and infrastructure developments - remain the dominant form of MDI, totaling $57 billion, nearly double the 2016 level. These projects now account for 63% of total investments, driven by the economic growth of Central Asia and increasing investor interest in energy, manufacturing, and extractive industries.

Memorandum

Kazakhstan to Help Jordan Assess Uranium Reserves

During Kazakh President Kassym-Jomart Tokayev’s official visit to Jordan, a memorandum of understanding was signed between Kazakhstan’s Kazatomprom National Atomic Company JSC and the Jordan Uranium Mining Company (JUMCO). The agreement outlines plans for cooperation in uranium exploration and mining in Jordan. Kazatomprom CEO Meirzhan Yusupov emphasized that the partnership with JUMCO presents new opportunities to strengthen Kazakhstan’s position in the global uranium industry. “This memorandum aligns with our strategic goals of efficiently utilizing our resource base. Additionally, studying foreign projects will provide valuable international experience and contribute to the sustainable development of both countries,” he said. Assessing Uranium Potential in Jordan The primary goal of the agreement is to evaluate the potential for uranium exploration and development in Jordan. This includes assessing reserves and analyzing the feasibility of using heap leaching technologies for extraction. Special attention will be given to environmental safety and economic viability. Based on the study results, both parties will decide on the next steps for project development. JUMCO CEO Mohammad Al-Shannagh stated that partnering with the world’s largest uranium producer could accelerate Jordan’s commercial uranium production. “Cooperation with Kazatomprom will open new horizons for us in uranium mining, allowing us to share knowledge, use advanced technologies, and jointly develop marketing strategies,” he said. Joint projects are expected to give new impetus to Jordan’s nuclear industry, creating jobs, attracting local contractors, and improving infrastructure. Kazakhstan’s Expanding Uranium Industry Kazakhstan’s collaboration with JUMCO provides an opportunity to expand its international reach, strengthen economic ties with Jordan, and enhance its influence in the global uranium sector. Kazatomprom is the world’s largest producer of natural uranium, with priority access to one of the world’s most significant resource bases. Since November 2018, Kazatomprom’s shares have been traded on the Astana International Financial Center Exchange and the London Stock Exchange.

Aviation

Four New Foreign Low-Cost Carriers to Launch Flights from Kazakhstan

Four new low-cost airlines are set to enter Kazakhstan’s aviation market, further expanding the country’s international air connectivity, according to Vice Minister of Transport Talgat Lastayev. Lastayev highlighted that the number of international flights to and from Kazakhstan has been increasing annually. The country currently has air links with 31 countries and 58 cities, operating 119 international routes. In 2024, 12 new flights were introduced across 22 routes, including major cities such as Mumbai (India), Jeddah (Saudi Arabia), and Prague (Czech Republic). Additionally, flights on 10 previously suspended routes were resumed. In 2025, Kazakhstan plans to launch flights to 16 new destinations, including Rome, Munich, Budapest, Shanghai, Guangzhou, and Busan. The country’s low-cost flight options will also expand with the arrival of four new budget airlines: SpiceJet (India) Eastar Jet (South Korea) T’way Air (South Korea) Thai AirAsia (Thailand) The entry of these carriers is expected to make international travel more affordable for passengers. Lastayev also noted that Kazakhstan’s “open skies” policy, aimed at liberalizing the aviation sector, was expanded in 2024 to include airports in Kyzylorda, Kostanay, and Atyrau. The policy is now in effect at all of Kazakhstan’s international airports.