Kashagan LPG to Fuel Kazakhstan’s Domestic Market

The Ministry of Energy of Kazakhstan announced on September 4 that following the negotiations between the partners of the North Caspian Project and Kazakhstan’s national gas company QazaqGaz, with the participation of the Ministry of Energy of Kazakhstan, an agreement had been signed regarding the sale and purchase of liquefied petroleum gas (LPG) from Kazakhstan’s Kashagan oil field. The North Caspian Project was developed under the North Caspian Sea Production Sharing Agreement signed in 1997, by Kazakhstan and an international consortium including KazMunayGas (16.88%), Eni (16.81%), Shell (16.81%), ExxonMobil (16.81%), TotalEnergies (16.81%), CNPC (8.33%), and INPEX Ltd (7.56%). The move comes amid the increasingly high demand for LPG, which cheaper than gasoline, is the most popular and economical fuel amongst Kazakhstan's vehicle owners. According to the agreement, supplies of LPG from Kashagan will be released at the end of 2025 and by 2027, on completion of work on the infrastructure, reach over 700,000 tons per year. The Ministry of Energy believes that supplies from Kashagan will help reduce the chronic shortage of LPG in Kazakhstan, and positively impact the socio-economic situation in the country's regions. As recently reported  by The Times of Central Asia, supplies have long failed to meet demand. In July, Kazakhstan’s Minister of Energy, Almasadam Satkaliyev, stated that in 2023, Kazakhstan had 582,000 motor vehicles running on LPG, an 18% increase compared to 2022 (491,000), resulting in a rise in consumption by 400,000 tons, or 28%. Last year, LPG consumption volumes amounted to 2.2 million tons compared to 1.8 million in 2022, and according to analysts, may increase this year by a further 200 thousand tons and reach 2.4 million annually. According to the Minister, Kazakhstan produced 1.6 million tons of LPG in 2023 and plans the same volume for 2024.

Price of Liquefied Petroleum Gas to Rise Again in Kazakhstan

The Ministry of Energy of Kazakhstan has published for public discussion, a draft by the Minister of Energy to increase the price of liquefied petroleum gas (LPG) from July 1. The maximum wholesale price of one ton of LPG will be increased from the current 40,320 tenge to 45,158 tenge, and the maximum retail price will increase slightly — by 5-8 tenge per liter, depending on the region. Cheaper than gasoline, LPG is the most popular fuel for vehicle owners in Kazakhstan. A sharp hike in the price of LPG was met with nationwide objection in January, triggering mass protests in Zhanaozen which spread nationwide and turned violent in Almaty and Astana. The ministry issued several reasons for what will be an unpopular move. First, the price of liquefied petroleum gas is much lower than the cost of its production. The production cost of LPG varies from 60 thousand to 70 thousand tenge per ton, whereas the current maximum wholesale price is 40,320 tenge per ton. Second, LPG consumption in Kazakhstan increases year on year. In 2023, it increased by 400 thousand tons, or 28%, compared to 2022. Last year, LPG consumption volumes amounted to 2.2 million tons compared to 1.8 million tons in 2022. Increasing consumption and the unprofitability of LPG production due to low prices have led to a decrease in the production of the fuel and its shortage in the regions. Today the deficit of LPG stands at 20-25%. Third, due to unprofitability, manufacturers are increasingly losing interest in LPG production and switching instead, to more profitable products. For the same reason, investors are also reluctant to invest in its production. Fourth, the price of LPG in Kazakhstan, between 54-86 tenge per litre depending on the region, is the lowest among former Soviet states. For comparison, the price per litre in Russia is equivalent to 132 tenge; in Kyrgyzstan, 159 tenge; in Azerbaijan, 171 tenge; and in Tajikistan, 273 tenge. According to analysts, in 2024, LPG consumption in Kazakhstan will increase by another 200 thousand tons and reach 2.4 million tons, leading to a potential shortage of 30-40%