17 October 2015 | 17:03

Iran and China to join construction of Kazakhstan's oil refinery

Kazakhstan is planning to construct its fourth oil refinery in Mangistau Oblast - the country's west - in cooperation with Iran and China, Tengrinews reports citing Atameken.info.

Deputy akim (vice-governor) of Mangistau Oblast Rakymbek Amirzhanov confirmed that representatives of Iran and China had proposed to take part in the construction.

Iran shows interest in the project due to several factors. "In Iran, all the oil refineries are located in the north of the country,” the Vice-Governor said. “All the oil fields are located in the south. Iran spends about $35 per ton of oil to transport crude from the south to the north of the country," Amirzhanov said. Therefore Kazakhstan, situated close to Iran’s north, is a good candidate for a new partnership in oil swaps.

When making oil swaps Kazakhstan and Iran usually exchange oil - Kazakhstan supplies its crude to Iran's northern refineries and in return Iran ships the same amount of crude from its southern fields to its Persian Gulf sea ports for Kazakhstan.

According to Vice-Governor Amirzhanov, Iran, same as Kazakhstan, exports around 40 percent of its crude oil. Until 2010, under the swap scheme, 5 million tons of Kazakhstani crude oil was transported through the port of Aktau to Iran every year. This sustained the port’s cargo turnover. Then the swap scheme was abandoned although its was favorable for both Iran and Kazakhstan, Amirzhanov said.

If the swap operations are resumed after the new refinery is built in Kazakhstan, oil products from Mangistau will be transported to the northern ports of Iran, and Iran will in turn provide crude oil to Kazakhstan from its southern fields. “It is in the interests of both countires. We have already held a number of official negotiations with the Ministry of Oil of Iran. Also, we have large companies interested in investing in this project," the deputy governor said.

Currently, Kazakhstan has three oil refineries, in Pavlodar, Atyrau and South Kazakhstan Oblasts. However, according to Amirzhanov, they do not cover Kazakhstan’s needs for petroleum products - the country’s deficit is about 1,5 million tons of oil, which constitutes 30 percent of the total market.

If Kazakhstani oil was processed in the region, Amirzhanov said, local oil producers would be able to save the money they spend to sell oil through the Black Sea terminals, which is extremely beneficial considering the currently low oil prices.

The new refinery will be able to produce high-octane gasoline and jet fuel that Kazakhstan currently imports from Russia, and thus close the existing deficit in the country, he said. “Iran is ready to take the remaining volumes through the ports of Aktau and Kuryk, and give its crude oil in the Gulf region to Chinese companies. This is China's interest in the project of construction of the fourth Kazakhstani oil refinery," Amirzhanov explained.

The future partners have different opinions on the refinery’s capacity. According to deputy governor, the Chinese side proposes a project with the capacity of 6 million tons of oil per year, whereas the Iranians insist on the refinery’s capacity to be at 10-12 million tons of oil per year.

Amirzhanov noted that with the timely funding, in the near future the project’s feasibility study would be completed, and by the end of the year an agreement for the construction would be signed.

The approximate minimum amount of investment in the construction of the project is estimated at $6 billion. Chinese companies, however, are willing to enter the project with investments estimated at $5 billion.

By Indira Urazova, editing by Tatyana Kuzmina

refinery project Oil news Kazakhstan Kazakh Iran company China