BAKU, Azerbaijan, November 5. Kazakhstan is
preparing for a gradual transition to market-based oil pricing by
2030 to ensure the stable supply of crude to domestic refineries
and encourage investment in the energy sector, said Yernar
Akhmettayev, Senior Research Analyst at Eurasian Energy Service,
S&P Global Commodity Insights, during a recent webinar,
Trend reports.
According to Akhmettayev, the country’s current pricing system
leaves oil producers with little incentive to supply the domestic
market. “Due to the low actual level of domestic prices, supplying
crude oil to Kazakh refineries is less profitable than exporting
it,” he explained. “As a result, producers have no motivation to
serve the domestic market”.
He noted that profitability was often not factored into domestic
pricing, which made the internal price almost twice as low as the
global level. While this approach helped keep fuel prices low for
consumers, it also created imbalances in the market, Akhmettayev
said. “Under such a model, it simply wasn’t profitable for oil
companies to sell oil domestically – exports brought much higher
income, while domestic sales generated almost zero profit”.
Akhmettayev emphasized that this challenge is particularly acute
for KazMunayGas (KMG), the main supplier of crude oil to the
country’s refineries. “Production from KMG’s mature assets has been
declining for some time, making it difficult to meet the growing
demand for petroleum products,” he said. To address this, the
Energy Ministry has required oil producers to allocate certain
volumes to the domestic market. “But in practice, these supplies
occur more through administrative enforcement than market
motivation,” he added.
Currently, Kazakhstan is discussing a phased removal of domestic
oil price regulation, with the goal of aligning prices with export
parity by 2030 – that is, the price producers could earn from
exports minus transport and tax costs.
“This step aims to create economic incentives for supplying
crude to the domestic market, ensure stable refinery operations,
and reduce unauthorized fuel outflows to neighboring countries,”
Akhmettayev said. Ultimately, he added, this should lead to a more
sustainable and balanced market model, where all participants
understand that the market operates under clear rules and according
to market logic.
