Kazakh petrol market faces "collapse" claims lobbyist

By bne IntelliNews September 24, 2013

bne -

Kazakhstan is facing the potential collapse of its gasoline market, an industry lobbyist claims, with already worrying shortages set to worsen next month due to the country's ageing and limited refining capacity.

The Kazakhstan Fuel Association (KFA) claims the market could buckle, according to Channel 31. Provoked by raised demand from commercial users, the shortages that are set to worsen in October when one of the country's three main refineries shuts for modernisation.

Retailers are receiving less fuel than usual due to higher demand from the railways and agriculture. Rationing has been introduced in the capital Astana, with residents having been issued with tokens that must be submitted with every purchase. Similar measures are anticipated in other parts of the country once the Shymkent refinery ceases output.

Despite its large reserves of oil and gas, countries across Central Asia tend to experience sporadic fuel shortages due to a lack of processing capacity. The issue is usually worst in southern states such as Kyrgyzstan and Tajikistan, which rely on fuel imports from Russia via Kazakhstan.

Astana plans to modernize all three of the country's main refineries - Atyrau, Pavlodar and Shymkent - to increase capacity, expand the range of products, and boost output to comply with Euro 4 and Euro 5 standards. However, while the modernisation is carried out, disruptions to supply are expected. Kazakhstan announced it would start sending oil for processing at Chinese refineries, but this has been delayed.

Analysts insist Kazakhstan must urgently build new refinery capacity. "One of our existing refineries ... Atyrau ... has operated since 1945," Oleg Yegorov, a senior fellow of the Institute of Economics at Kazakhstan's Ministry of Education and Science told Trend, "and the two others since the 1980s."

However, Astana appears unenthusiastic. Oil and Gas Minister Uzakbai Karabalin said earlier this year that the issue is under discussion, but not imminent. "The construction [of new refinery capacity] takes a lot of time, so this is a project for the future," he said.

In the meantime, a representative from the KFA called on the government to lift a ban on petrol imports from Russia, and to make the distribution process more transparent. "We see the way out in transparency, so that limited amounts of petrol and fuel are supplied to target distributors - there are problems in the distribution itself," Ashim Abdrakhmetov insisted, according to Tengrinews.

The government temporarily banned several classes of Russian petrol imports earlier this year. That move followed the introduction of new Russian environmental standards, which saw low-grade fuel being dumped on the markets of Central Asia.

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