Baku, Azerbaijan, Sept.24
By Elena Kosolapova - Trend:
Kazakhstan's problem with the periodic shortage of fuels and lubricants may only be resolved by increasing the prices for fuel and transition to market conditions in this sphere, according to Mariyam Zhumadil, the senior analyst at Halyk Finance.
"For present, we don't see another option besides increasing the prices for the fuels and lubricants in the country," Zhumadil told Trend on Sept.23.
It is necessary to increase the prices in order to eliminate the current shortage and to attract investments in the modernization of the country's refining sphere, the senior analyst said, adding that the government of Kazakhstan slightly increased the prices in August, but it wasn't enough.
Currently, the prices for the fuel in the exporting countries continue to exceed the regulated domestic prices in Kazakhstan. Therefore, the purchase of the fuel from other countries is no longer profitable for the importers.
At the same time, the refineries in Kazakhstan operating from the Soviet period, do not fully meet the demands of the domestic market. The production volume in these refineries is lower than in other countries with more modern facilities. The reconstruction of these refineries, or construction of new ones could resolve the problem with the shortage of fuels and lubricants in Kazakhstan.
"The reconstruction of the refineries and construction of new ones will allow to increase the production of fuel and petroleum products and reduce the prime cost of the products," the senior analyst said.
Nevertheless, the reconstruction and construction of refineries also requires higher prices for fuels and lubricants, as under the current conditions of price regulation, it is unprofitable for investors and plant owners to invest in their modernization, according to Zhumadil.
"For making investments, the plant owners should have some guarantees of future prices. The country has such mechanisms for the generating companies. That's to say, a company carrying out an investment program gets a certain tariff that ensures the return on invested capital."
"If such a mechanism is used in the oil refining sphere, the investors and refinery owners will be more confident in forecasting the return on capital, there will be less uncertainty, so they will be more willing to invest in new projects," the analyst added.
Three large refineries - Pavlodar refinery, Atyrau refinery and Shymkent refinery - operate in Kazakhstan and their total processing volume nears 13 million metric tons.
Around one third of the fuels and lubricants consumed in Kazakhstan is imported from Russia.
Earlier, Kazakhstan's Deputy Minister of Energy Uzakbai Karabalin said that there is a difficult situation in Russia, as its Achinsk refinery has just now started full production after the accident. Additionally, scheduled repair work started in several Russian refineries in autumn.
He stressed Russia started to deliver a part of its petroleum products to Crimea from 2014.
Therefore, Kazakhstan negotiates with the State Oil Company of Azerbaijan (SOCAR) to purchase fuels and lubricants and thereby, to cover the shortage of petroleum products in its domestic market. The country also holds talks with Turkmenistan to purchase fuels and lubricants.
At the same time, a senior representative of SOCAR said that the company has limited potential to export petroleum products to Kazakhstan, due to the country's current pricing policy.