Privatization of Kazakhstan’s Oil Refineries - Experts Comment

Two of Kazakhstan’s three major oil refineries — the Atyrau Oil Refinery (ANPZ) and the Pavlodar Petrochemical Plant (PNHZ) — are being considered for partial privatization, Orda.kz reports.

The Agency for the Protection and Development of Competition (APDC) has proposed selling 50% of the shares in these refineries, arguing that private management could improve efficiency.

Rustam Akhmetov, First Deputy Chair of APDC, pointed to the example of Shymkent Oil Refinery, where 51% of the shares belong to China’s CNPC.

We see examples of successful operation of the Shymkent Oil Refinery, where the form of management is private. There are no officials from the state, fewer accidents, technological failures, and lower costs for repair work. This proves that private management can be more effective than state management,
 Rustam Akhmetov

However, is Kazakhstan ready to hand over such strategic assets to private investors, and are investors even interested?

Authority to Privatize?

Oil industry expert Artur Shakhnazaryan points out that APDC does not have the authority to privatize strategic enterprises such as ANPZ and PNHZ.

That responsibility lies with the Samruk-Kazyna Sovereign Wealth Fund, which owns the refineries through KazMunayGas (KMG).

The authorized body for privatization of strategic enterprises such as the Atyrau Oil Refinery or the Pavlodar Petrochemical Plant is not the AZRK, but the special department for privatization of the Samruk-Kazyna fund. Have you heard any statements from Samruk-Kazyna or this special department? Or, at worst, from the Ministry of Energy of the Republic of Kazakhstan or the owner of the two aforementioned oil refineries, the national company KazMunayGas? I have never heard of it,
 Artur Shakhnazaryan

Shakhnazaryan argues that KazMunayGas adequately supplies the domestic market with oil products and keeps fuel prices relatively low, so there is no urgent need for privatization.

However, Olzhas Baidildinov, a member of the experts' club under the Senate and founder of the "Baidildinov. Oil" Telegram channel holds the opposite view.

He believes Kazakhstan must privatize its oil refineries to create a competitive market.

I have been writing about the need to privatize oil refineries since 2013. And I said that all these plants should be in a market, competitive environment — competing with each other, competing with oil refining in other countries. There is nothing 'strategic' about oil refineries,
Olzhas Baidildinov

Baidildinov criticizes KazMunayGas’s management, particularly at ANPZ, which has suffered repeated incidents.

Even President Qasym-Jomart Toqayev has questioned the effectiveness of KMG’s refinery modernization efforts, which cost over two trillion tenge but failed to reduce repair intervals.

At the exchange rate at that time, the modernization cost about six billion dollars. For this money, it would have been possible to build a new refinery. Unfortunately, KMG has not made any significant progress in putting oil refining in order. There are many questions about how oil gets there, who is appointed to these plants and by what principles. In my opinion, there is no need to shake up the team or introduce any new procedures at KazMunayGas. These plants should simply be privatized,
Olzhas Baidildinov 

The analyst argues that private investors would have to handle accidents themselves, whereas currently, KMG uses taxpayer money for emergency repairs.

When these plants are actually assessed, it will most likely turn out that their market value is several times less than the funds invested in them. Therefore, naturally, this will be met with opposition from KMG itself,
Olzhas Baidildinov

By comparison, the Shymkent Oil Refinery, which is partially privatized, has fewer malfunctions due to private sector oversight and profit-driven efficiency measures.

If Kazakhstan were to privatize its refineries, the key question remains — who would be interested?

One theory is that privatization could be linked to Kazakhstan’s broader negotiations with foreign oil giants.

President Toqayev has suggested renegotiating contracts with companies operating at Tengiz, Kashagan, and Karachaganak.

APDC previously proposed swapping refinery shares for stakes in these major oil fields, but foreign corporations rejected the idea.

None of the oil majors need these plants for the simple reason that the oil products market in Kazakhstan has not been fully liberalized. The state still controls all areas — oil production, wholesale prices for oil and oil products, refining tariffs, and transportation tariffs,
 Olzhas Baidildinov

Industry expert Nurlan Zhumagulov, director of the Energy Monitor public foundation, agrees that Kazakhstan’s refineries are unattractive to foreign investors.

A year ago, we offered Chinese investors (Sinopec) 50% in the ANPZ. They came and studied it. Since then, there has been silence,
Nurlan Zhumagulov

Currently, Kazakhstan's oil export prices are twice as high as domestic prices, making the refining market far less profitable for international investors.

Could Russia become a potential player?

Oil expert Artur Shakhnazaryan suggests that Tatneft, one of Russia’s largest oil companies, has previously shown interest in acquiring ANPZ.

Pavlodar Petrochemical Plant has always been focused on processing Siberian sulfur oil and depends on supplies from Russia. As for Atyrau Refinery, in 2019-2021, the volume of problems at the plant became critical — then the Russian companies Lukoil and Tatneft were invited to conduct a technical audit. After the audit, Tatneft offered to transfer Atyrau Refinery to trust management, openly showing its interest,
Artur Shakhnazaryan

Tatneft already controls two projects in Atyrau, which it operates independently of KazMunayGas.

Despite the APDC’s push for privatization, it remains unlikely that Kazakhstan’s oil refineries will be sold anytime soon.

In reality, APDC’s proposal may simply be "testing the waters."

As is often the case in Kazakhstan, the answer to whether these refineries will pass into private hands — and to whom — may only become clear much later and in an unexpected way.
 
Original Author: Nikita Drobny