Archive for November 8th, 2007
Why Are There Gasoline Shortages in Kazakhstan?
A shortage of gasoline is not exactly what one would expect in Kazakhstan, one of today’s most preeminent oil exporting countries. However, this is exactly what has been the case in the last few weeks when Kazakh motorists in several regions found gas stations out of gasoline. While the production of oil in the Central Asian republic keeps growing year after year, its refining industry is a remnant of the Soviet era and to a part connected to Russian rather than Kazakh oil infrastructure. The old age of Kazakhstan’s oil refineries and their reliance on Russian crude for production of certain gasoline products are the cause for the latest shortages - that much seems clear. The impact of the crisis and the response of the public and the government, however, are open for debate.
One of the reasons for the recent shortages appears to be a planned maintenance break at the oil refineries in Shymkent and Atyrau. Even though just prior to the closure of the plants it was announced that adequate reserves were available in order to dispel any concerns of potential interruption in deliveries of refined oil products, the closure of the refineries has become a contentious issues over the last few weeks. The deputies of the maslikhat of the Southern Kazakhstan Region have promised to investigate the shortage at the Shymkent refinery as well as the accompanied price increases of refined oil products. The Atyrau refinery has resumed its operations, according to the spokesman of the company, but its closure has still apparently caused considerable disruptions in deliveries of gasoline to gas stations in Western Kazakhstan. Along with the shortages, the prices of gasoline grew by as much as 10 percent - apparently as a response to the global increase in the prices of oil.
Oil production in Kazakhstan was 64.8 million tons in 2006 and is projected to be 65.3 million tons in 2007. Despite these numbers, Kazakhstan has been troubled in being self-sufficient in production of gasoline and other refined products. There are several reasons for this state of affairs but there are three that particularly stand out. One is the Soviet legacy that left Kazakhstan’s oil and gas infrastructure connected with Russia and other former Soviet countries. This has led to Kazakhstan having to import oil from Russia and increasing its dependence on its northern neighbor. Another one is the low level of development of the petrochemical industry in Kazakhstan. This has become painfully clear since oil extracted in Kazakhstan tends to vary in quality depending on particular fields and is more difficult to refine. The third reason is the high price of oil on the world market that makes it for companies operating in Kazakhstan (including domestic companies) far more lucrative to export oil abroad than to refine it and sell the refined products domestically.
What will happen next is not clear. The gasoline shortages could stop and the prices could return to pre-shortage levels once the refineries resume their operations. The same could also be achieved by an order “from above” when the oil companies and gas stations themselves would be ordered to freeze up the prices in order to curb discontent and looming inflation. However, most analysts suggest that an increase in price is inevitable, and the current situation will lead to a consolidation of the retail gasoline market. Currently, the big oil companies own less than 40 percent of the market; the rest is made up by independent retailers. The independent retailers are, naturally, much more susceptible to any price hikes from the oil refineries that are for the most part owned by the national oil company KazMunaiGas (100 percent of the Atyrau refinery, 50 percent of the Shymkent refinery). Therefore, some view the current shortage as a way for the major oil companies, and specifically KazMunaiGas, to muscle their way to an increased market share. According to some analysts, it is likely that they will increase their market share to more than 70 percent over the next 2-3 years. KazMunaiGas itself hopes to achieve a market penetration of at least 15 percent by 2010 up from current 4 percent.
It remains to be seen how this situation will play itself out. Kazakhstan is currently battling banking and real estate crises and occasional shortages of bread, vegetable oil and sugar. The inflation is widely expected to exceed the targeted rate and the government is under pressure both to curb public protests against rising prices and to keep inflation in check. The authorities may react with an order to keep the prices low and blame the current shortages on speculators (as they have done with the rising bread prices). Or - they may abandon their policy of keeping prices artificially low and let market forces sort out the issue themselves.
News Roundup - November 8, 2007
Reuters: Parker Drilling gets new contracts for three land rigs
Oil and gas driller Parker Drilling Co said its subsidiaries operating in Mexico and Kazakhstan got new contracts for three land rigs…
Reuters: Kazakh ministry denies Kashagan suspension plan
Kazakhstan’s environment minister denied on Wednesday that he sought to suspend activities at the giant Kashagan oilfield if a consortium of Western oil companies developing it did not comply with ecological requirements…
Reuters: Kazakhstan plans no sovereign bonds this yr or next
Kazakhstan has no plans to issue sovereign bonds this year or next, the economy ministry said on Wednesday, backtracking on an earlier statement that it may do so to boost confidence in domestic banks…
Reuters: Kazakh TuranAlem seeks control of Turkey Sekerbank
TuranAlem, Kazakhstan’s second-largest bank, wants to increase its stake in Turkey’s Sekerbank, the Kazakh bank said on Wednesday…
Forbes: European Minerals sees first gold pour from Varvarinskoye by end-Dec
European Minerals Corp said it sees first gold pour from Varvarinskoye gold/copper project in Northern Kazakhstan by December end as it plans to begin introducing ore into the process plant by mid November…
Kazinform: Kazakh Secretary of State held a number of meetings in Washington
Kazakh State Secretary Kanat Saudabayev met with Alcee Hastings, the chairman of the US Helsinki Commission, congressman and Tom Lantos, the chairman of the US House Committee on Foreign Affairs within the frame of his working visit to the United States of America, Kazinform refers to the MFA’s press-service.
EurasiaNet: Russia urges formation of Central Asia energy club
Russia wants to use the Shanghai Cooperation Organization as a mechanism to regulate Central Asian energy exports. It remains to be seen whether China, the other power in the SCO, shares Russia’s energy vision.
Hemscott: Halyk Bank long-term foreign currency IDR affirmed ‘BB+’ - Fitch
Fitch Ratings said it affirmed Kazakhstan-based Halyk Bank’s long-term foreign currency issuer default rating ‘BB+’, short-term foreign currency issuer default at ‘B’, long-term local currency issuer default at ‘BBB-’…
Interfax: PetroKazakhstan output declines 4.4% in Q3
PetroKazakhstan, a joint venture between Kazakhstan’s KazMunayGas and China National Petroleum Corporation (CNPC), saw oil production decline 4.4% in the third quarter year-on-year to 13.019 million barrels (1.681 million tonnes) , the company said in a statement on Wednesday…
Interfax: Nazarbayev holds talks with Syrian PM, vice president
Kazakh President Nursultan Nazarbayev met with Syrian Prime Minister Muhammad Naji al-Utri and Vice President Farouk al-Shara during an ongoing state visit to Syria…
Kazinform: Kazakhstan, the US to sign five-year military coop plan in January 2008
A five-year military cooperation plan of Kazakhstan and the US will be signed in January, 2008. Daniyal Akhmetov, the Defense Minister of Kazakhstan has maid it public today during the meeting with the US military delegation chaired by Admiral William Fallon…
Global Voices Online: Kazakhstan: Interview with Akhan Satayev, Film Director
Tomorrow the movie theatres of Kazakhstan and Russia will start shows of “Racketeer”, one of the first Kazakhstani commercial film-making experiences…
November 6, 2007 will take its place in the history of Kazakhstan’s modernization as a date of official start of the governmental (national) program 30 corporate leaders of Kazakhstan…
