ALMATY – Kazakhstan plans to more than double its annual oil refining capacity to 39 million tons by 2040, seeking to move the energy sector toward deeper processing and higher-value products. But the scale of the planned expansion also raises a fundamental question: how will the country secure sufficient economically viable crude supplies for its future refineries while maintaining incentives to invest in exploration and production?
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The issue was highlighted at the 13th annual Central Asia and Caspian Oil and Gas Petrochemistry and Refining Summit 2026, where the Ministry of Energy presented the main provisions of Kazakhstan’s Concept for the Development of the Oil Refining Industry for 2025–2040.
The concept envisages increasing annual crude processing from 18 million to 39 million tons and raising the ratio of oil production to refining from 5:1 to 2.5:1.
Refining expansion depends on a growing resource base
The strategy is intended to modernize and expand refining capacity, increase the depth of crude processing, improve fuel quality and develop petrochemical production. By 2040, the government targets an increase in refining depth from 89% to 94%, upgrades in motor fuel quality to the K5+ environmental class, and higher production of benzene and paraxylene.
The ambition is clear: Kazakhstan wants more of the value generated from its hydrocarbons to come from processing rather than the sale of crude alone. The economics of supplying those future facilities, however, may prove equally important.
Kazakhstan’s Ministry of Energy estimates the country’s geological oil reserves at 13.2 billion tons, of which nearly 4.4 billion tons are recoverable, reported the Kazinform news agency. These figures are subject to revision as geological exploration continues and reserve assessments are updated.
KazMunayGas has launched a large-scale exploration program for 2026–2030, including the drilling of 26 wells, as part of efforts to replenish the country’s resource base.
The question is not simply whether Kazakhstan has oil underground, but whether sufficient volumes can be developed and supplied to domestic refineries on economically sustainable terms. That issue becomes more important as the planned refining capacity approaches 39 million tons annually.
The economics of domestic crude supplies
Energy analyst Abzal Narymbetov argues that Kazakhstan’s current fuel-market reforms need to be considered alongside the government’s refining ambitions. In his analysis published on his Energy Analytics Telegram channel, Narymbetov points to the decision to move away from state regulation of fuel prices in February 2025. According to his account, the reform was intended in part to make supplying crude to domestic refineries economically attractive for producers, helping address chronic fuel shortages and create conditions for investment in refining.
“However, the subsequent introduction of an additional excise in December 2025, equivalent to 50% of the additional margin generated by resource holders, and discussion of raising the share to 95%, have raised concerns among oil producers,” he wrote.
Narymbetov says such a policy could reduce the economic benefit producers receive from supplying crude to the domestic market.
Investment incentives become part of the refining equation
The broader issue, according to Narymbetov, is how the fiscal treatment of domestic crude supplies could affect investment decisions in oil production and exploration. He argues that if producers are required to direct a large share of their output to domestic refineries while the state subsequently captures most of the additional margin generated by higher fuel prices, companies may face weaker incentives to invest in exploration and production.
This could become significant for Kazakhstan’s future refining plans because new processing capacity requires a reliable long-term supply of crude.
“If the state administratively obliges oil producers to supply crude to refineries while simultaneously reducing the economic return from those supplies, it effectively increases investment risks in the very industry that must provide crude for future refining,” Narymbetov wrote.
From raw materials to higher-value products
The government’s refining strategy itself reflects an effort to address a longstanding structural feature of Kazakhstan’s energy economy: the large gap between crude production and domestic processing. Under the new concept, six priorities have been identified. They include ensuring the domestic economy is supplied with petroleum products, increasing petrochemical output, developing applied research, strengthening human capital, adapting the sector to technological trends and expanding export opportunities.
The planned increase in refining depth from 89% to 94% is intended to improve the efficiency of crude processing, while higher production of petrochemical feedstocks such as benzene and paraxylene could support the development of downstream industries.
The government expects the program to create jobs, strengthen the sector’s scientific and technological base and establish conditions for increasing exports of refined and petrochemical products.
