MARCH 14 2014 (The Conway Bulletin) — A rare admission from a Kazakh insider that the country’s energy policies may not be working hints at future fuel price increases, analysts have said.

Sauat Mynbayev, chairman of state-owned KazMunaiGas, said sending Kazakh oil to China to be processed into fuel and then re-importing it to make up for a shortfall in domestic refining capacity has become too expensive.

“The transit operations regarding the refining of Kazakhstan’s oil in China has become unprofitable,” media quoted him as saying.

Analysts immediately unpicked his statement. What this meant, they said, was that fuel prices would rise shortly.

And that, as the government knows, will be deeply unpopular.

Oil-rich Kazakhstan has a chronic lack of refining capacity. The three refineries at Shymkent, Pavlodar and Atyrau are often under repair. New refineries are only scheduled to come on-stream in five or six years time.

To make up for the shortfall, Kazakhstan is importing refined fuel from China and Russia. It is also sending unrefined fuel into China for processing and then shipping it back over the border.

Added to this complex arrangement is Kazakhstan’s 20% currency devaluation in February which makes imports even more expensive.

Mr Mynbayev has just been made head of Kazakhstan’s Greco-Roman wrestling federation, a position that underlines his insider credentials.

For an insider to admit a policy problem is almost unheard of in Kazakhstan. As analysts have now warned, expect fuel price increases.

ENDS
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(News report from Issue No. 176, published on March 19 2014)