In midsummer, the Government of Kazakhstan extended the ban on exports of light petroleum products for another six months. So, the total duration of the moratorium on exports has been almost two years by now. However, this restrictive measure is likely to last till 2015 – the time Kazakhstan is expected to complete the modernization of its three refineries and be able to cover on its own the demand by the domestic market for fuels.
A ban for exports of a number of petroleum products will operate in Kazakhstan from July 1 through the end of 2012. As the government decree issued on August 16 states, the ban for exports is introduced "in order to prevent a critical shortage in petroleum products in the domestic market and relevant price rise." In particular, the new ban applies to exports of light distillates, kerosene, gas oil and other petroleum products. The given restrictions do not apply to naphtha and household heating oil.
The Customs Control Committee under the Ministry of Finance will monitor the implementation of the decree. Along with that, the Ministry of Economic Development and Trade was commissioned to duly inform the Eurasian Economic Commission of the introduced ban, as well as to submit to it for consideration a proposal as to the application of similar measures by other Customs Union member-states.
As predicted by independent experts, at the end of 2012 the ban will be extended and will operate until 2015. By that time, the Government of Kazakhstan expects to complete renovation of the existing refineries to fully meet the demand of the domestic market for petroleum products.
We remind that a temporary ban on export of light oil products was introduced for the first time in Kazakhstan at the end of 2010 and later on was extended in July, and then at the end of 2011. Officials repeatedly told that the government would give up this mechanism. Indeed, for some period of time, some exceptions from the ban were allowed. In the end the ban is again extended, true, as it was promised in February of this year by the Minister of Oil and Gas Sauat Mynbayev. According to him, the reason is not only the lack of fuel in the country, but also that Kazakhstan accepted Russia’s arguments linking the exports of light petroleum products from our country with re-exports of Russian raw materials.
Also noteworthy is the fact that during the period of the ban Kazakhstan repeatedly applied to the Customs Union asking Russia and Belarus to launch similar actions, stating that with their introduction the domestic fuel market of the Customs Union would stabilize. In early August 2012 the CU committee again supported this proposal addressed to the governments of Russia and Belarus, with a request to consider a temporary ban on exports of the said products, following Kazakhstan.
However, the probability that our partners will accept that offer is negligible. Unlike Kazakhstan, which is unable to meet its demand for fuels, Russia is not currently suffering the shortage in them. As for Belarus, where the share of petroleum products exceeds 35% in the total value of exports, the sale of petroleum products outside the CIS is among the main items of income in foreign trade of the country.
With its 65 refineries with total refining capacity of 273 million tons, Russia is the largest petroleum products producer in the Customs Union and ranks third in the world after the U.S.A. and China. In 2011, Russia’s refineries produced 36.6 million tons of gasoline, 9.3 million tons of jet fuel, 75.1 million tons of fuel oil, and 70.6 million tons of diesel fuel.
For example, last year, 4.15 million tons of gasolines were exported from Russia, or 11% of the total gasoline output. The target markets for export of the products were the CIS countries, including Kazakhstan (801,000 tons), Kyrgyzstan (451,000 tons), and Tajikistan (154,000 thousand tons), as well as the Baltic States, Mongolia, and Afghanistan.
Concerning diesel fuel, the export of it accounts for usually more than a half of its output. The main problem of the oil processing industry in Russia, as well as for Kazakhstan, is low quality and low yield of light petroleum products. Along with that, in accordance with the scheduled deadlines for transition to the Euro-4 and Euro-5 (in 2014 and 2015) standards, the Russian petroleum companies are implementing a program of renovation of the refineries, providing for improvement of secondary oil processing. By estimate of experts, if relevant agreements between the state authorities and plants are met, by the year 2015 about 180 million tons of light petroleum products will be produced in the Russian Federation at the domestic market capacity of 120 million tons.
Among the countries, Belarus is the least interested in Kazakhstan’s initiative. This country is now actively increasing exports of petroleum products to Europe: 12.3 million tons in 2011, a 39.6% rise. In value terms, the share of fuels was $9.2 billion, or 22.3% of all exports by Belarus to the markets of Europe. Total sales of fuels produced in Belarus increased by 39.2% to 15.6 million tons.
One more steadily growing market is Ukraine, where domestic prices of motor fuel reach the level of those in Europe. For exporters of petroleum products from Belarus, export from Ukraine is the most profitable. The expectations are that this year the exports of fuel from Belarus to Ukraine could rise by 22% to 3.4 million tons – 3.5 million tons.
We should have in mind that according to Belarus’s plan of action on implementation of the key directions of socio-economic development of the country for 2011–2015, the country plans to enter new markets of petroleum products, such as Nigeria, China, Canada, Scandinavian countries, and etc.
In case of the ban on exports of light petroleum products in the CU, Belarus will have to fully re-orient its exports towards the Russian market. This is despite the fact that gasoline prices in Russia are almost equal with those in Belarus, and diesel fuel prices are even cheaper. It is the reason why Belarusian oil products were not practically exported to Russia in 2011: only 24 thousand tons of gasoline and 11 thousand tons of diesel fuel were sold to Russia. Besides, it is not absolutely profitable for Belarus to buy Russian oil for dollars and sell it back as petroleum products for rubles.
Thus, it seems that Kazakhstan will have to solve its problems on its own.
As part of implementation of the order of President to increase funding of promising scientific research through innovation grants, the Government of Kazakhstan set priority areas to provide these grants. As noted in the relevant resolutio issued on August 16, 2012, these areas include: advanced technologies for exploration, production, transportation and processing of mineral and hydrocarbon resources, advanced technologies in the mining and metal sectors, agriculture, biotechnology, chemical and petrochemical sectors, machinery (including the use of new materials), alternative energy and energy efficiency, as well as information and communication technologies.
Under the Resolution of Kazakhstan’s Government of July 5, 2012, KazTransGas JSC was given the status of a national operator of Kazakhstan in the area of gas and gas distribution. The areas of business of the company involve the participation in development and implementation of a general scheme of gas distribution in the country, the exercising of the pre-emptive right of the state to purchase crude and product gas, as well as facilities of the unified gas distribution system (UGD). In addition, among the powers of KTG is the provision of centralized dispatch control of the UGD facilities operation, as well as the wholesale and retail sale of marketable gas.
We remind that KazTransGas as part of the National Company KazMunayGas was set up in 2000 to systematize work in the oil and gas industry. It carries out corporate management of assets in the exploration, production, transportation and distribution of gas. KazTransGas Group of Companies includes enterprises and organizations engaged in production, transportation and sale of gas and products of its processing, as well as provides relevant services.
In January–June 2012, KazTransGas JSC increased transportation of gas over its trunk pipelines to 56.4 billion m3, a 3.9% rise, compared to the same period last year. Transporttaion of gas over the pipeline systems of KazTransGas’s subsidiary – Intergas Central Asia JSC – increased by 0.6% to 51.1 billion m3, of which 39.7 billion m3 were the international transit, 5.5 billion m3 – for domestic distribution, and 5.9 billion m3 – for export. In its turn, the volume of gas carried by the other subsidiary of KTG – The Asian Gas Pipeline LLP, over the trunk gas pipeline Kazakhstan – China rose 1.5 fold to 5.3 billion m3.
As for the sale of natural gas, in the first half of 2012 its volume reached 6.282 billion m3, which is 10.2% more than in January–June last year.
KazRosGas increased supplies to the domestic market
In the first half of the year, KazRosGas JV supplied 2.075 billion m3 of natural gas to the domestic market, which is 1.8% more than in the same period of 2011. Among them, direct supplies to the West Kazakhstan oblast were 444 million m3, counter-supplies of the Russian gas to the Kostanai oblast were 512 million m3, and of Uzbek gas to Almaty, Almaty oblast, South Kazakhstan oblast and Zhambyl oblast – 1,118 million m3.
During this period, at the Orenburg gas chemical combine the company processed 4,168 million m3 of raw gas from the Karachaganak field, which is slightly less than in the first half of 2011 (4,177 million m3).
In addition to dry gas, also technical sulfur, LPG, ethane fraction, stable gas condensate, pentane-hexane fraction and fuel gas were produced as products of processing. The company sold these products in the Russian Federation and in the markets of Eastern Europe.
For information: KazRosGas JV was established under an agreement of November 28, 2001, entered into between Kazakhstan and Russia on cooperation in the gas sector. The participants to the JV on a parity basis are KazMunayGas and Gazprom Open JSC.
In the North-Kazakhstan oblast, the construction of the trunk gas pipeline West-North – Center started, which will run through the Timiryazevsky, Shal Akyn, Aiyrtausky and Tayynshinsky districts and will cover 186.3 km. The project is part of the state-run program for provision of the northern and central regions of Kazakhstan with gas. Apart from the South Kazakhstan Oblast, the route will pass through the Kostanay and Akmola regions.
In the Atyrau oblast the renovation of the high-pressure trunk gas pipeline Inder – Makhambet is under completion. This project is part of the regional program for 2011–2012 for provision of the given areas with gas. 107 km of the pipeline will be replaced. To date, a trench with length of 46 km is digged out, and 35 km of pipes welded. In the near future all the scheduled operations will be completed. It is expected that the renovation will make it possible to ensure uninterrupted gas distribution for the two districts of the oblast.
The construction of the gas turbine power station (GTPS) Akshabulak in the Kyzylorda oblast is accomplished. In the course of implementation of this project, aimed to eliminate the problems of disposal of the casing-head gas and the shortage of electricity in the region, gas turbines units were installed and relevant infrastructure created in 2010–2012. New power generating facilities made it possible to improve the power distribution scheme at the Kumkol and Akshabulak fields. So, at the Akshabulak three gas turbines with total capacity of 87 MW were commissioned. The latest equipment from the American, Japanese and Finnish manufacturers was used in the power plant construction.
The total cost of the said investment project is 19.6 billion tenge. The project was implemented under financial support of the Kazakhstan Development Bank. In addition, investments from the Japanese banks JBIC and CITI BANK of Tokio, and the French BNP Paribas were raised.
Attractive price for transit of Russia’s oil
The Agency for Regulation of Natural Monopolies set a price of KZT1,673.89 (excl. VAT) per ton per one thousand km for transit of Russia’s oil over the trunk pipeline Atasu – Alashankou via the territory of Kazakhstan Tenge, which will become effective September 1, 2012. Although at present, the Russian oil exporters do not use this route, a number of them have already expressed their willingness to carry oil via the Atasu – Alashankou pipe, provided that they do not face problems of getting quotas in their export schedules. In this regard, the Ministry of Oil and Gas of Kazakhstan set a quota for Russian companies for transportation of their oil over the pipeline in the amount of 250 tons per month. The Ministry of Oil and Gas believes that this quota will operate until the end of 2012.
Meanwhile, the price of carrying Kazakhstani LHC over the Atasu – Alashankou pipeline is 3,818 tenge per ton per one thousand miles. Such difference in the rates for Kazakhstan’s and Russia’s oil is due, first of all, to different methodology of calculation applied by the Agency for Regulation of Natural Monopolies, and secondly, the aspire of Kazakhstan to make the project more attractive for the Russian exporters.
After state examination the National Company KazMunayGas got a positive opinion with regard to the feasibility study for construction of a ship-building yard and ship-repairing yard in the Kuryk settlement. This project is under joint implementation by KMG and Italian ENI, and is managed by Directorate for KMG’s Enterprises under Construction LLP, a 100% subsidiary of KazMunayGas. In its turn, ENI finances the development of feasibility study and design estimates and participates in organization of financing of the shipyards construction. Kazakhstani companies will be engaged to carry out the design; the selection of the contractors will be completed before December 2012.
The companies Teniz Burgylau, Keppel Kazakhstan and Ersai Caspian Contractor signed a contract to build the first self-lift floating drilling rig (SFDR) in Kazakhstan, designed for drilling of wells at the water depth of 5m to 80 m.
The SFDR construction will be carried out at the shipyards of the Mangistau oblast, involving to 1,000 local staffers. The project documentation developed by Keppel FELS Ltd is already agreed with the Kazakhstani authorities and c