ASTANA – Kazakhstan’s ambition to increase oil refining capacity to 40 million tons a year will require more than expanding existing plants and building a new refinery. The country will also need to address the economic incentives that currently make crude exports more attractive than supplying some oil to domestic refineries, Executive Director of Energy Monitor Fund Nurlan Zhumagulov told The Astana Times.
Photo credit: Gary Kavanagh / Getty Images
Kazakhstan processed 18.4 million tons of crude in 2025, while the government’s long-term strategy envisages increasing refining capacity to about 40 million tons annually. The plan aims to strengthen domestic processing, improve fuel security and shift the sector toward higher-value petroleum and petrochemical products.
The key question, however, is whether additional refining capacity alone can reduce the country’s dependence on crude exports if producers continue to receive stronger economic returns from international markets.
Building capacity is only the first step
Nurlan Zhumagulov. Photo credit: orda.kz
Under Kazakhstan’s Oil Refining Industry Development Concept for 2025-2040, the capacity of existing refineries is expected to increase significantly, followed by the construction of a new refinery with a capacity of up to 10 million tons a year. The strategy also aims to increase refining depth from around 89% to 94%, along with higher production of motor fuels and petrochemical products.
According to Zhumagulov, the program should be implemented in stages. The first stage involves expanding and modernizing the three existing refineries by 2032. The Shymkent refinery is expected to increase capacity from 6 million to 12 million tons a year, while the Pavlodar refinery could rise from 6 million to 8 million tons. The Atyrau refinery is also expected to add 1.2 million tons of capacity.
The second stage would involve building a new 10-million-ton refinery, with a feasibility study currently in preparation. Initial results are expected in November, after which the authorities will determine whether and where the project should proceed. The new refinery would also require crude supplies and supporting infrastructure.
The price incentive problem
The most significant challenge, according to Zhumagulov, is economic rather than technical.
“Today, it is more profitable for investors to export crude oil than to process it domestically because of the price difference. The export price is around 250,000 tenge (US$550) per ton, while oil producers sell crude on the domestic market for nearly 120,000 tenge (US$264) per ton,” he said.
This price gap helps explain why expanding refining capacity does not automatically guarantee that additional crude will be redirected to domestic plants.
The point matters because Kazakhstan’s largest producing projects account for most of national output.
“Today, Tengiz, Kashagan and Karachaganak, which account for around 70% of total oil production, do not supply a single ton of crude to the domestic market because it is not economically beneficial for them,” Zhumagulov said.
Can more refining reduce crude dependence?
For Kazakhstan, the 40-million-ton target therefore represents more than an industrial expansion. It could require a gradual adjustment of the relationship between crude production, domestic supply and fuel prices.
Zhumagulov said that once refining volumes reach the planned level, petroleum product prices would eventually need to move towards market-based pricing.
“Today, domestic petroleum product prices are kept relatively low so that fuel remains affordable for the population. But if we reach 40 million tons of refining, prices will eventually have to become market-based. The question is whether people will be ready to pay world prices for petroleum products. That is a separate issue, because higher wages and incomes would be needed first,” he said.
The success of the 40-million-ton ambition will therefore depend on several elements moving together: expanding existing refineries, building the new plant, securing reliable domestic crude supplies, establishing economically viable pricing mechanisms, and building infrastructure capable of distributing or exporting additional products.
For Kazakhstan, the challenge is not simply expanding refining capacity, but creating economic conditions that make domestic processing more attractive and support higher-value production.
