THE MECHANISM FOR QUOTING OIL SUPPLIES TO THE DOMESTIC MARKET IS NOT TRANSPARENT

The analysis of the state of competition in the oil sales market for 2022 and 2023 has been completed.

Of the 84.2 million tons of oil and gas condensate produced in 2022, 18.8 million tons or 22.3% were sent to the domestic market. In 2023, out of 89.9 million tons, 18.3 million tons or 20% were sold at the refinery.

In general, over the past 10 years, there has been a steady growth in consumption, which increased by 4 million tons or 28%.

Subsidization of domestic oil prices is carried out at the expense of subsurface users. For this purpose, quotas for domestic oil supplies and the method of reverse calculation of purchase prices for oil from wholesale and retail prices for fuels and lubricants set by the state are used.

Under these conditions, the price of oil purchase in the domestic market has developed at the level of 65,000 to 110,000 tenge per ton, which is lower than the export price by 55-70%, respectively.

Taking into account the share of the Tengiz, Kashagan and Karachaganak fields that are not involved in the supply of oil to the domestic market in the amount of 67% of the total production, the main "social burden" falls on subsurface users belonging to the "aging" group of fields.

These are 105 subsurface users, where CNPC and KazMunaiGas are the main ones with a constant combined market share of over 60%.

According to the forecast of the Ministry of Energy, by 2030, the volume of oil produced by them will decrease by 5 million tons or 15%, while consumption growth is projected at 20%.

This will increase the "social burden" from the current 55% to 77% by 2030, which, while maintaining the current situation, will exhaust the possibilities of oil producers to subsidize the domestic market.

The mechanism of oil supply quotas applied by the state is not transparent. There are no regulatory legal acts defining criteria for determining the volume of oil supplies for the domestic market.

From the monthly oil transportation (supply) Schedules approved by the Ministry of Energy, it follows that the share of participation in oil supplies to the domestic market for subsurface users ranges from 30 to 60%, which directly affects the level of workload and revenues of companies.

In this regard, the Roadmap for the development of competition in the oil sales market in order to stimulate an increase in oil production and attract investment will provide for measures to introduce a mechanism for balanced regulation of prices for fuels and lubricants, taking into account indicators of external and internal markets, as well as the establishment of rules for oil supply quotas.

More information about the analysis can be found here:
https://www.gov.kz/memleket/entities/zk/documents/details/594177?lang=ru