Kazakhstan's January ban on the export of naphtha, heating oil, and marine fuel is under scrutiny, as it poses a risk of shutting down mini-oil refineries, warns Muratbek Makhanov, Managing Director of the Oil and Gas Sector and Ecology at the National Chamber of Entrepreneurs (Atameken).

Source: The Times of Central Asia

Since January 29, the country has enforced an official ban on exporting gasoline, diesel fuel, and specific petroleum products, including those to other member states of the Eurasian Economic Union (EAEU). The restrictions apply to by-products from mini-refineries, such as naphtha, which serves as fuel for tractors, a gasoline additive, or a paint solvent, along with heating oil and marine fuel. While Kazakhstan has three major refineries, around 30 smaller facilities primarily focus on diesel production, leading to the inevitable creation of these by-products.

Industry representatives argue that there is limited domestic demand for these by-products, making export their primary market.

The oil refining process makes it impossible to produce only diesel fuel. Other petroleum products, such as heating oil and naphtha, are unavoidable by-products that now fall under the export ban. Selling them domestically is not viable, which means we may have to suspend production entirely, leading to a diesel fuel shortage.

Isabayev suggested that while the export ban on diesel fuel should remain, the restrictions on by-products should be lifted.

Makhanov echoed these concerns, emphasizing that exporting surplus petroleum products would enhance revenue generation, boosting the budget through customs duties, fees, and other charges.

Restrictions on the export of refined oil by-products, such as naphtha, heating oil, and marine fuel, harm not only the financial stability of mini-refineries but also Kazakhstan’s broader economy. The government must reconsider this ban and allow mini-refineries to export these products.

Amanbai Sembekuly, another representative from the mini-refinery sector, cautioned that shutting down small processing facilities, which primarily refine crude from less productive and unprofitable fields, could also halt oil production at those locations.

Kazakhstani naphtha is mainly exported to Turkey, Uzbekistan, Italy, and Greece, where it is processed into diesel fuel. Industry representatives note that similar refining activities could occur within Kazakhstan's major refineries, but this would necessitate the establishment of additional processing lines.

This would be a significant loss to the national budget, which is already suffering from lower revenues due to the ban. The export customs duty on our high-sulphur oil products is 2.5 times higher than the duty on diesel fuel, so these restrictions are costing the government money.

As reported by The Times of Central Asia, Kazakh authorities announced at the end of January the liberalization of domestic oil product prices, eliminating 11 regulations that had governed wholesale and retail fuel prices since 2014. This decision aims to alleviate fuel shortages, which have worsened due to price discrepancies that encourage fuel exports to neighboring markets.