Oil refinery - The Times Of Central Asia

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Fuel Exports

Kazakhstan Plans to Export Up to a Third of Its Fuel Production by 2040

The government of Kazakhstan has approved a long-term development strategy for the oil refining industry for the period 2025-2040, significantly increasing its forecast for petroleum product exports. The new plan triples previous export projections, aiming for exports to account for 30% of total production by 2040. According to the strategy, key priorities include expanding refining capacity and boosting exports to China, India, and neighboring Central Asian countries. By comparison, in May 2024, the Ministry of Energy had presented a separate draft strategy looking toward 2050, which proposed limiting fuel exports to 10%, and only in cases where domestic supply exceeded demand. Refinery Modernization and Capacity Goals The new strategy builds on recent progress. Following the modernization of Kazakhstan’s three largest refineries, Atyrau, Pavlodar, and Shymkent, total oil processing capacity reached 17 million tons per year. The plan envisions boosting this figure to 39 million tons annually by 2040. “The refining depth has already reached 89%, and the motor fuel produced now meets Euro-4 standards and higher. These improvements have allowed us to meet 90-95% of domestic demand and created favorable conditions for the export of high value-added products,” the Ministry of Energy stated. The strategy calls for expanding existing facilities and constructing a new petrochemical complex to raise refining depth to 94%. This will ensure full domestic fuel coverage amid projected annual demand growth of 1.5-2%, driven by urbanization and industrial development. A major focus will be the advancement of Kazakhstan’s oil and gas chemical industry, including the production of polymers, fertilizers, and other high-value products. Up to $5 billion is expected to be invested in this sector. “The strategy is designed to attract foreign investment, particularly given the country’s reserves of 30 billion barrels of oil. In the context of the global energy transition, this will position Kazakhstan as a regional leader in hydrocarbon processing and enhance economic resilience to global commodity price fluctuations,” the ministry emphasized. Implementation is scheduled to begin in 2025 with pilot projects for refinery digitization. Current Production and Export Landscape In 2024, Kazakhstan’s refineries produced 13 million tons of petroleum products, 1% more than in 2023, according to national oil and gas company KazMunayGas. This included 4.3 million tons each of gasoline and other fuels, and 4.4 million tons of diesel. Kazakhstan also imported 1.2 million tons of fuel from Russia. Prior to the reintroduction of export restrictions in 2024, the country exported 13,500 tons of motor fuel. Similar bans were in place in 2021, 2023, and 2024, meaning Kazakhstan’s fuel exports effectively occurred only in 2020 (nearly 120,000 tons) and 2022 (1,800 tons). As previously reported by The Times of Central Asia, Kazakhstan is planning to invest $15 billion in its oil and gas chemical sector as part of six major projects aimed at strengthening downstream capacity and export potential.

Oil

Kazakhstan Aims to Double Oil Refining Capacity by 2040

Kazakhstan plans to double its oil refining capacity to 38 million tons by 2040, according to the country’s Minister of Energy, Yerlan Akkenzhenov. The announcement came during a recent meeting with executives from the national oil company KazMunayGas and representatives from the country’s four main refineries: Atyrau, Pavlodar, Shymkent, and the Aktau-based Caspi Bitum plant. Akkenzhenov said the goal is enshrined in Kazakhstan’s new Oil Refining Industry Development Concept for 2025-2040, which aims to significantly boost the share of refined oil, improve resource efficiency, and increase the production of value-added petroleum products. Key objectives of the strategy include: Increasing the depth of refining to 94%, aligning with global best practices; A full transition to high environmental standard fuels, such as K5 gasoline and Jet A-1 jet fuel; Expanding the production of petrochemical products for both domestic and international markets; Enhancing the technological sophistication and operational efficiency of Kazakhstan’s refineries. “We must not just supply the domestic market with fuel today but lay the foundation for technological sovereignty and sustainable development for decades to come,” Akkenzhenov said. “The successful realization of this concept depends on our ability to work efficiently, make bold decisions, and take responsibility for them. There is no time for hesitation, the country expects concrete results: modern plants, quality products, and reliable power supply.” As part of the initiative, the minister urged the accelerated development of a feasibility study to double the capacity of the Shymkent refinery and called for swift agreement signings with potential partners. He also stressed the need for the Pavlodar petrochemical plant to begin work on its next expansion phase. Meanwhile, the Atyrau refinery is to focus on implementing approved projects while preparing for further capacity growth. The Caspi Bitum plant has been tasked with completing post-modernization commissioning and ensuring stable operations. Kazakhstan’s three major oil refineries are located in: Pavlodar (northeast); Atyrau (west); Shymkent (south). As previously reported by The Times of Central Asia, the national antimonopoly agency proposed in March to privatize state stakes in the Pavlodar and Atyrau refineries, a move that could reshape the sector’s ownership landscape.

Privatization

Kazakhstan Proposes Privatization of Two Major Oil Refineries

Kazakhstan’s Agency for Protection and Development of Competition (AZRC) has proposed the partial privatization of the Atyrau and Pavlodar oil refineries. According to Rustam Akhmetov, the agency’s first deputy chairman, the proposal involves selling 50% of the state’s stake in these assets. Current Refinery Ownership Structure Kazakhstan operates three major oil refineries, located in: Pavlodar (northeast) Atyrau (west) Shymkent (southern region) The Pavlodar refinery is fully owned by KazMunayGas Refining and Marketing JSC, a subsidiary of the state-owned KazMunayGas (KMG). Similarly, the Atyrau refinery is 100% state-owned through KMG. In contrast, the Shymkent refinery operates under a 50-50 joint venture between KMG and China National Petroleum Corporation (CNPC) through PetroKazakhstan Group. Shymkent as a Model for Privatization AZRC cites the Shymkent refinery as the most efficiently operated among the three. “We see a successful example in Shymkent, where 50% is owned by the private sector. Most importantly, private management means fewer government officials in operational roles. As a result, there are significantly fewer accidents, fewer technological failures, and less downtime for repairs. This confirms that private sector management is more effective,” Akhmetov told reporters on the sidelines of Parliament. He also noted that preliminary discussions on privatization have already taken place within the government. Oil Refining in 2024 According to the Ministry of Energy, Kazakhstan is expected to refine 17.9 million tons of oil in 2024, yielding 14.5 million tons of oil products. The three main refineries processed similar volumes in the previous year: Shymkent refinery 5.74 million tons of oil processed 2.09 million tons of motor gasoline 1.78 million tons of diesel fuel 319,000 tons of jet fuel 335,000 tons of liquefied petroleum gas Atyrau refinery 5.5 million tons of oil processed 1.6 million tons of gasoline 1.6 million tons of diesel fuel 188,000 tons of jet fuel 213,000 tons of autogas Pavlodar refinery 5.5 million tons of oil processed 1.6 million tons of gasoline 1.8 million tons of diesel fuel 236,000 tons of jet fuel 321,000 tons of liquefied petroleum gas In addition to these major refineries, more than two dozen mini-refineries across Kazakhstan contribute to oil processing. Privatization of Other Key Sectors Akhmetov also revealed that AZRC has recommended the privatization of most municipal utilities in the housing and communal services (HCS) sector, including heat and power plants. Additionally, the agency, in coordination with sectoral government bodies, has agreed to privatize a significant portion of the defense-industrial complex, including firms handling government contracts. However, some strategically important enterprises will remain under state control. Akhmetov did not specify which companies would be exempt from privatization. As The Times of Central Asia previously reported, Kazakhstan plans to establish a major defense industry hub at Semey’s tank repair plant, the only such facility in Central Asia.

Caspian Pipeline

A Blow to the CPC: Geopolitical Intrigue Surrounding the Pipeline

More than a week has passed since Ukrainian drones attacked the Kropotkinskaya oil refinery, part of the Caspian Pipeline Consortium (CPC) system. However, the incident remains a topic of heated debate in Kazakhstan. What Happened? On February 17, the Kropotkinskaya oil pumping station, located in Kavkazsky district, Krasnodar Krai, was targeted by multiple UAVs carrying explosives and metal fragments. While there were no casualties, the facility sustained damage and was taken out of service. Oil transportation through the Tengiz-Novorossiysk pipeline has since been rerouted via a bypass system, ensuring that shipments from the CPC Marine Terminal continue as normal. On February 20-21, a Kazakh delegation, including Daniyar Berlibayev, special representative for the CPC project from KazMunayGas, and Yerbolat Mendybayev, Director of Transportation and Logistics at KazMunayGas, visited the Kropotkinskaya station alongside CPC Deputy General Director Hakim Kasymov to assess the damage. At a CPC shareholders' meeting in Abu Dhabi on February 25-26, CEO Nikolay Gorban presented a report on the extent of the damage, equipment dismantling progress, and contractor mobilization status. According to the CPC press service, shareholders pledged full support for repair work, which is expected to take approximately two months. Kazakh Debate: Is Ukraine to Blame? While CPC shareholders, including entities from Kazakhstan, Russia, Europe, and the United States, treated the issue as a technical problem, Kazakh public discourse took a different turn, led by Mazhilis deputies. Parliamentarian Nikita Shatalov questioned Ukraine’s motivations on his Telegram channel: “The Ukrainian side could not have been unaware that 90% of the oil transported through the pipeline is Kazakh, extracted from Tengiz, with revenues benefiting Western companies exporting to the EU. The pipeline is international, with KazMunayGas, Chevron, ExxonMobil, and Italy’s Eni as shareholders. This attack was clearly intended to damage Kazakhstan’s economic interests.” Shatalov emphasized Kazakhstan’s neutral stance in the Ukraine-Russia war, pointing out that diplomatic contacts between Astana and Kyiv have continued at the highest levels, including President Kassym-Jomart Tokayev’s engagement with Volodymyr Zelensky. “Those responsible for this attack on an international consortium must be punished. Kazakhstan must demand accountability from Ukraine for the damage inflicted and the threat to bilateral relations.” His stance was echoed by Mazhilis deputy Marat Bashimov, who called the attack a "direct assault on Kazakhstan’s interests" in a Facebook post: “The Ukrainian side knew exactly how strategically vital the CPC pipeline is for Kazakh oil exports.” Bashimov argued that Kazakhstan has always upheld neutrality, supported diplomatic resolution efforts, and even refused to recognize the self-proclaimed Donetsk and Luhansk republics. Kazakh Debate: Is Russia to Blame? Not all deputies agreed. Mazhilisman Yermurat Bapi strongly rejected demands for Ukrainian compensation, arguing that Kazakhstan has no moral or legal grounds to make such a claim: “For more than three years, Ukraine has been fighting for survival against an aggressor that invaded its territory. As part of this war, Ukraine has the right to choose its defense strategies.” Bapi went further, blaming Kazakhstan’s overreliance on Russian infrastructure for the crisis: “The CPC pipeline was a strategic mistake of...

Oil and Gas

Kazakhstan Ends Era of Cheap Fuel: Price Controls Set for Abolition

On January 17, the Ministry of Energy of the Republic of Kazakhstan published a number of draft orders on the Open NLA (normative legal acts) portal, which were to be discussed within five days. In total, the Ministry proposed the abolition of eleven orders regulating wholesale and retail prices for petroleum products, which have been under price control since 2014. In addition, it intends to change the calculation formulas and price ceilings for wholesale and retail sales of liquefied and natural gas. I have been writing about the need for price liberalization since 2018, as seen in articles such as “#Kazneft, part 2: The Bermuda Gasoline Triangle - Why Prices Will Rise” and “#Kazneft, part 4: We Rank Seventh in the World for the Cheapest Gasoline. Is It Sold at a Loss?” This is a landmark event for the Government of Kazakhstan, which has long maintained not only the lowest fuel prices in the region but some of the lowest globally. The country consistently ranks among the top ten nations with the cheapest energy resources, including fuel, natural gas, coal, and electricity. Cheap and Even Cheaper According to Global Petrol Prices, as of January 20, 2025, fuel prices per liter in dollar terms across the EAEU, CIS, and neighboring countries are as follows: (Table 1) Country RON-95 Diesel Turkmenistan 0,43 0,29 Kazakhstan 0,47 0,55 Russia 0,61 0,71 Azerbaijan 0,65 0,59 Belorussia 0,75 0,75 Kyrgyzstan 0,81 0,81 Afghanistan 0,83 0,83 Uzbekistan 0,99 0,95 Georgia 1,09 1,06 China 1,15 1,02 Ukraine 1,39 1,37 Mongolia 1,49 1,19 Kazakhstan ranks seventh globally for the affordability of RON-95 gasoline, trailing behind Angola, Egypt, Algeria, Kuwait, Turkmenistan, and Malaysia. At the same time, there are “throwaway” prices in Iran, Libya, and Venezuela, but these price indicators do not reflect the actual availability of fuel in these countries. Turkmenistan also shows relatively low fuel prices, primarily due to the use of alternative fuels, such as methane, in transportation. Kazakhstan has historically had nearly double the price gap compared to its neighboring countries, which has facilitated the shadow export of fuel despite an official ban on exporting petroleum products. A Leaky Bucket I have described Kazakhstan's domestic fuel market as a "leaky bucket"— no matter how much fuel is produced, it is constantly in short supply. In 2024, the country processed about 18 million tons of oil, with its three major refineries — Atyrau: 99% owned by the national company KazMunayGas (KMG), Shymkent: 51% owned by China National Petroleum Corporation (CNPC), and 49% by KMG, and Pavlodar: 100% KMG — accounting for approximately 17 million tons. Mini-refineries produced an additional one million tons. The production of petroleum products (excluding fuel oil) amounted to around 14.5 million tons. The balance of petroleum products for 2025 is as follows, million tons: (Table 2) Product Production in the Republic of Kazakhstan Import from Russia Import to production, % RON-92, RON-95, RON-98 5,0 0,29 6 % Diesel fuel 5,1 0,45 9 % Jet fuel 0,75 0,3 40 % Bitumen/tar 1,1 0,50 45 % For 2025,...

Oil and Gas

KazMunayGaz Looking to Buy Another European Oil Refinery

Kazakhstan’s KazMunayGaz (KMG) is seeking to acquire an oil refinery in Bulgaria from Russia’s LUKoil at a bargain price. The purchase of Lukoil Neftohim Burgas, the largest oil refinery in the Balkans, would, according to some media sources, more than double [KMG’s] European refining capacity.” KMG reported a bid of $1 billion for the refinery, which one outlet stated “seems small.” Pressured Out The Burgas refinery was built in the early 1960s and “joined the LUKoil Group” in 1999. The European Union decision to impose a ban on Russian oil imports after the Kremlin launched its full-scale war on Ukraine deprived Lukoil Nefthohim Burgas of its major source of crude oil. According to a Financial Times report from November 2024, the Bulgarian government pressured LUKoil to sell the refinery, hitting the Russian company “with a 60% tax on profits in an effort to force out its owners” and prohibiting the “export of Russian crude-based products from Lukoil Neftohim Burgas.” In turn, LUKoil complained about “discriminatory laws and other unfair, biased political decisions toward the refinery.” KMG reportedly lost interest in the refinery in late 2024, but BNN Bloomberg reported on January 7 that the Kazakh company was still among the bidders for the Bulgarian refinery. Advantage KMG When the EU banned Russian oil imports, Lukoil Nefthohim Burgas compensated by purchasing oil from Kazakhstan and the Middle East. If KMG buys the Bulgarian refinery, presumably most or all of the crude processed there will come from Kazakhstan. Kazakhstan exported some 70.5 million tons of oil in 2023, and expects figures will be slightly less in 2024, some 68.8 million tons, due to maintenance at the Tengiz and Kashagan fields. Some 80% of those oil exports are shipped from Kazakhstan through the Caspian Pipeline Consortium (CPC) pipeline to Russia’s Black Sea port at Novorossiysk. Prior to Russia’s full-scale invasion of Ukraine, the EU purchased about 50% of the Kazakh oil shipped through the CPC pipeline, but that amount has risen to 80% since the ban on Russian oil imports was imposed. Kazakhstan is also increasing the amount of oil it exports through Azerbaijan to Georgia’s Black Sea port at Batumi, where KMG subsidiary KazTransOil owns the oil terminal. Kazakhstan has a deal to ship 1.5 million tons of oil annually through Azerbaijan, but Kazakh Energy Minister Abdusalam Satkaliyev said in November 2024 that his country was looking to boost that to 20 million tons. Kazakhstan currently has two Aframax-class oil tankers (deadweight 80,000 tons each) operating in the Black Sea, but plans to bring this number to 12 during the coming years. The Lukoil Nefthohim Burgas refinery has a capacity to process some seven tons of oil annually. KMG International already owns two oil refineries in Romania. The Petromidia refinery, with an annual capacity of some five million tons, is located 20 kilometers from the Black Sea port city of Constanta, and the much smaller and older Vega refinery, north of Bucharest, with an annual capacity of some 350,000 tons....