Mutual substitution of oil between Kazakhstan and Russia guarantees supplies to Pavlodar refinery

Kazakhstan, Astana, June 19 / Trend D. Mukhtarov /

A decision to supply Kazakh oil to Russia as a compensation for loss of the Russian budget from tax-free West Siberian oil supplies to Kazakhstan and in particular to the Pavlodar Petrochemical Plant (northern Kazakhstan), guarantees stability of supplies, Pavlodar Petrochemical Plant director general Shukhrat Danbai said today.

"The decision on a compensation for loss of the Russian budget from tax free Russian oil supplies to our plant guarantees the stability of these supplies," he told Trend today. "This is a concrete step that refiners appreciate. Earlier, our plant had a ragged schedule of raw material supplies from Russia by reducing the volumes two-fold."

Director General of the plant recalled that it will be shut down for scheduled maintenance in late June.

"A month after the repair, this issue will take concrete shape," he said. "We hope that the supply of raw materials to our company will be regular and stable with no disruptions."

On Tuesday morning, after a government meeting, Kazakh oil and gas minister Sauat Mynbayev told media that Kazakhstan will supply more than 1.5 million tons of crude oil to Russia as a compensation for loss of duty free Russian oil supplies to the Pavlodar Petrochemical Plant.

"The conditional loss of the Russian budget will be calculated for that range of petroleum products which will be imported from Russia to Kazakhstan," the minister said. "The volume of crude oil worth $1.5 million, maybe a little more will be supplied for this amount. Everything was calculated beginning in early 2012."

He stressed that an agreement was reached which will run until January 2014. The process is underway.

This situation is explained by the fact that the Pavlodar plant was built in the 1970s during the years of the Soviet Union. It is only one of three Kazakhstan refineries, technologically oriented on oil processing from the fields in Western Siberia. A question on of the supply of Russian raw materials to the Kazakh plant arose after the collapse of the Soviet Union and the creation of independent states.

Later it was resolved and an intergovernmental agreement signed. However, the problems with an established scheme of supply between Russia and Kazakhstan have recently occurred due to the expected change of government in Russia related to the election of a new president.

Russia cut oil supplies by half at the Pavlodar plant because Kazakhstan has not signed the methodology of calculation of export duties on oil and oil products within the Customs Union. Oil supplies to the Pavlodar plant in May amounted to 270,000 tons instead of 500,000 tons monthly.

Oil and Gas Minister Sauat Mynbayev told media earlier that Kazakhstan hopes to settle all disputes within the Customs Union with Russia after the new appointments in the Russian government.

Pavlodar Petrochemical Plant is the largest enterprise on oil refining, production and sale of petroleum products in Kazakhstan. It produces petrol, diesel, jet fuel, fuel oil, gas, oil bitumen, coke and sulphur.

The design capacity is 7.5 million tons per year. The depth of oil refining at the plant is about 85 per cent and is focused on West Siberian oil. Pavlodar Petrochemical Plant shareholders are Refinery Company RT (KazMunayGas Processing and Marketing's subsidiary) - 58 per cent of the shares and the Sovereign Wealth Fund Samruk-Kazyna - 42 per cent of the shares.

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