BAKU, Azerbaijan, November 5. Kazakhstan is preparing for a gradual transition to market-based oil pricing by 2030 to ensure the stable supply of crude to domestic refineries and encourage investment in the energy sector, said Yernar Akhmettayev, Senior Research Analyst at Eurasian Energy Service, S&P Global Commodity Insights, during a recent webinar, Trend reports.
According to Akhmettayev, the country’s current pricing system leaves oil producers with little incentive to supply the domestic market. "Due to the low actual level of domestic prices, supplying crude oil to Kazakh refineries is less profitable than exporting it," he explained. "As a result, producers have no motivation to serve the domestic market".
He noted that profitability was often not factored into domestic pricing, which made the internal price almost twice as low as the global level. While this approach helped keep fuel prices low for consumers, it also created imbalances in the market, Akhmettayev said. "Under such a model, it simply wasn’t profitable for oil companies to sell oil domestically - exports brought much higher income, while domestic sales generated almost zero profit".
Akhmettayev emphasized that this challenge is particularly acute for KazMunayGas (KMG), the main supplier of crude oil to the country’s refineries. "Production from KMG’s mature assets has been declining for some time, making it difficult to meet the growing demand for petroleum products," he said. To address this, the Energy Ministry has required oil producers to allocate certain volumes to the domestic market. "But in practice, these supplies occur more through administrative enforcement than market motivation," he added.
Currently, Kazakhstan is discussing a phased removal of domestic oil price regulation, with the goal of aligning prices with export parity by 2030 - that is, the price producers could earn from exports minus transport and tax costs.
"This step aims to create economic incentives for supplying crude to the domestic market, ensure stable refinery operations, and reduce unauthorized fuel outflows to neighboring countries," Akhmettayev said. Ultimately, he added, this should lead to a more sustainable and balanced market model, where all participants understand that the market operates under clear rules and according to market logic.