Cost of fuels and lubes in Kazakhstan to be linked to prices in Russia

Cost of fuels and lubes in Kazakhstan to be linked to prices in Russia

Astana, Kazakhstan, Dec.9

By Daniyar Mukhtarov - Trend:

The government of Kazakhstan is introducing monthly recalculation of prices for fuels and lubricants, which will vary depending on the prices for fuel in Russia, Vice-Minister of Energy of Kazakhstan Uzakbay Karabalin said Dec.9 at a briefing in Astana.

He said that in order to stabilize the situation on domestic oil products market, it was decided to correlate the country's prices depending on the price changes in Russia, which supplies one-third of Kazakhstan's gasoline consumption.

The deputy minister said that one of the causes of fuels and lubricants shortage on the domestic market of Kazakhstan in fall of 2014 was the difference in prices.

"Until recently, we had the lowest prices for fuels and lubricants, which led to the unauthorized export of fuels and lubricants and increase of the deficit, despite the ban on the export of oil products," said Karabalin.

In order to make up for the reserve of fuels and lubricants, KazMunaiGas National Company purchased them from abroad at a loss, he said.

"The big difference in prices was leading to the overflow of fuels and lubricants. And today, considerable volume of cheapened fuel from Russia started to enter the Kazakh market as a result of cheapening of Russian ruble and decrease in prices for oil and petroleum products," said Karabalin.

He said the neighboring Russia will introduce the so-called tax maneuver from Jan.1, 2015.

"It means Russia is making amendments to the tax law on the oil and gas sector," he said. "The export duties on oil and petroleum products will be reduced in stages and simultaneously, mineral extraction tax (MET) rate will increase by 1.7 times and gas condensate - by 6.5 times."

"Therefore, price changes are expected in Russia as a result of introduction of tax maneuver and taking into account that the cooperation within the Eurasian Economic Union will start from Jan.1, 2015, our task is to stabilize the fuels and lubricants market," said the deputy minister.

He said that in particular, rules are being developed today for setting marginal prices for these types of oil products, adding that the rules will take into account the fluctuations in the Russian market.

He noted that starting from Jan. 1, 2015 the marginal prices will be monthly set by the Energy Ministry in coordination with the National Economy Ministry of Kazakhstan.

Karabalin said that aside from a monthly recalculation of price limits, a monthly recalculation of excises will also be held, and that will be an obstacle for traders in receiving extra incomes.

He said the price of fuels and lubricants is formed in the domestic market in Russia and Kazakhstan from the gasoline cost plus excises, VAT and the seller's margin, but when the Russian oil products are imported to Kazakhstan their cost is formed without taking into account these excises and the VAT.

"So, here we are going to charge the Kazakh excise duties and VAT. Therefore, the excises will become adjustable," he said.

Karabalin went on to add that the monthly recalculation of prices for regulated types of fuels and lubricants and the excise rates are designed to protect fuel supplies to the domestic market from sharp surges and shocks associated with changes in prices of oil in world markets and in Russia.

Edited SI

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