Oil from Karachaganak to be supplied to Kazakhstani refineries at market price

Deliveries of crude oil from the Karachaganak field for processing at Kazakhstani oil refineries will be held on commercial terms, that is, at a price close to the netback, Magzum Mirzagaliyev, deputy minister of energy, told.

"We agreed in the framework of the settlement of the dispute that Kazakhstan will have the right to take oil to the domestic market at a commercial price. We have three oil refineries. We have not yet spoken about which oil refinery will process it, but today there are three main refineries, plus a fourth - Condensate, which is located in the West Kazakhstan region, which was launched last year," M. Mirzagaliyev said on Wednesday. “On commercial terms means on the terms of export netback (export revenues without transport costs and duties),” Mirzagaliyev said.

As part of the settlement of a dispute on the calculation of income from the sale of oil from the Karachaganak field between Kazakhstan and the Karachaganak Petroleum Operating consortium, the parties agreed on possible deliveries of hydrocarbons on commercial terms for local refineries and for the development of the gas-chemical complex in the West Kazakhstan region.

Energy Minister Kanat Bozumbayev earlier reported that by the end of the year, KPO shareholders would have to submit an editorial office for supplying the domestic market with up to 1 million tonnes of condensate and an editorial office for supplying the domestic market for the development of petrochemical production in the country up to 1 billion cubic metres of gas at agreed commercial prices. "These will be obligations starting next year. This will be in the settlement agreement," K. Bozumbayev said.

The fact that there are disagreements between the republic and the contractor of the Karachaganak project related to the calculation of the share of production sharing, the Ministry of Energy of Kazakhstan reported back in April 2016. At the end of the same year, Kazakhstan filed a lawsuit in arbitration. Karachaganak field is one of the largest in the world. Oil reserves amount to 1.2 billion tonnes, gas - to 1.35 trillion cubic metres.

The development of Karachaganak, according to the agreement, signed in 1997 and designed for 40 years, is carried out by a consortium of foreign companies represented by Shell (29.25%), Eni (29.25%), Chevron (18%), LUKOIL (13.5%) and the KazMunaiGas (10%). The main activity of Condensate is the processing of hydrocarbon raw materials to produce high-quality motor fuels at a light-duty oil refinery with a capacity of 850 thousand tonnes per year, located in the Karachaganak oil and gas condensate field. Types of oil products produced by the company: AI-92 gasoline (K5 class, Euro-5), AI-95 (K5), diesel fuel DT-L (K5), diesel fuel DT-L (class K4), vacuum gas oil, tar.

In December 2016, Condensate launched commercial production of Euro-5 environmental-grade motor fuels. The design production capacity of Euro-5 high-octane gasoline is 200 thousand tonnes per year: AI-92 - 114 thousand tonnes, AI-95 - 86 thousand tonnes per year.

In Kazakhstan, with a population of over 18.2 million people, there are three more refineries operating - Atyrau, Pavlodar and Shymkent. The Shymkent refinery was built in 1985, KazMunayGaz and CNPC each hold a 50% stake in the plant. Atyrau and Pavlodar plants were built in 1945 and 1978, respectively, controlled by KazMunaiGas.

Reported by ABC TV (Kazakhstan).

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