ASTANA – Kazakhstan is seeking to turn its refining capacity into a competitive advantage in regional fuel markets as disruptions to Russian supplies and tightening global diesel markets create new opportunities and risks for Central Asia’s largest oil producer.
Photo credit: Qazaq Expert Club
The government aims to fully meet domestic demand for petroleum products and begin exporting finished fuels to neighboring Central Asian countries by 2030. The strategy would allow Kazakhstan to capture more value from its oil resources and diversify its energy revenues beyond crude exports.
Dr. Glenn Agung Hole, an institutional economist, associate professor at the University of South-Eastern Norway and nonresident fellow at CFive. Photo credit: Hole’s personal archieve
The ambition is realistic, but success will depend on whether Kazakhstan can turn additional refining capacity into a sustainable export industry, said Dr. Glenn Agung Hole, an institutional economist, associate professor at the University of South-Eastern Norway and nonresident fellow at CFive.
“I would distinguish between increasing refining capacity and developing a genuinely competitive export industry,” Hole told The Astana Times.
According to him, Kazakhstan has substantial oil resources, an established petroleum sector and a favorable geographical position. The government plans to expand the Shymkent refinery’s annual capacity from six million to 12 million metric tons by 2030. Its development strategy also anticipates a potential diesel surplus of 1.8 million tons that year.
“However, these are projections, not guaranteed export volumes,” Hole said.
Expanding production amid supply pressures
Kazakhstan’s export ambitions come as its crude oil production faces pressure. The country produced 69.4 million tons of crude oil between January and September, down 8.3% from the same period in 2025, Deputy Energy Minister Yerlan Akbarov said at an Oct. 13 government meeting Oct. 13.
Output at major fields also declined. Tengiz produced 26.7 million tons, equivalent to 88% of its year-earlier output. Kashagan produced 12.8 million tons, while Karachaganak produced 7.5 million tons.
The government lowered its 2026 crude oil and condensate production forecast to 96 million tons from 98 million tons, partly because of disruptions to the Caspian Pipeline Consortium (CPC) infrastructure following drone attacks.
The CPC transports around 80% of Kazakhstan’s crude oil exports, leaving the country exposed to disruptions along a major export route. Alternative routes across the Caspian Sea and toward China offer options for diversification, although they can involve higher costs.
Despite the decline in crude oil production, petroleum product output has continued to grow. Kazakhstan produced 11.9 million tons of petroleum products in January-September, up 2.4% year over year. Gasoline production increased 3.9% to 4.6 million tons, while diesel output rose 3.3% to 4.8 million tons. Jet fuel production grew 21.8% to 700,000 tons.
In 2025, Kazakhstan processed 18.4 million tons of crude oil and produced around 15.5 million tons of petroleum products, meeting more than 90% of domestic demand, according to the Energy Ministry.
Alongside the Shymkent expansion, the government plans to increase processing capacity at the Pavlodar refinery and has discussed the possibility of building a fourth refinery.
However, greater refining capacity will not automatically translate into higher exports. Kazakhstan must secure sufficient crude supplies, produce fuels that meet the requirements of potential buyers and ensure that additional output can be transported at competitive prices.
Hole highlighted that Kazakhstan’s main challenge is not a lack of natural resources but its ability to convert them into productive capital and sustainable industrial development.
“Building refineries requires investment. Developing a competitive refining industry requires something more difficult: credible institutions, predictable regulation, functioning markets, access to finance and commercial arrangements that investors can trust over decades,” he said.
He added that government targets alone cannot create international competitiveness. Investors must have confidence that commercial conditions will remain predictable, while producers must be able to respond to market demand rather than primarily to administrative decisions.
Disruptions open a window for Kazakhstan
Disruptions to Russian refinery operations and changes in fuel export restrictions have exposed vulnerabilities in regional supply chains, creating potential opportunities for Kazakhstan to supply neighboring markets.
Nurlan Zhumagulov, an executive director of the Energy Monitor Fund, identified the Kyrgyz Republic, Uzbekistan and potentially Afghanistan as the most likely destinations for Kazakh fuel exports.
Nurlan Zhumagulov, executive director of the Energy Monitor Fund. Photo credit: kazservice.kz
“Undoubtedly, our closest neighbors are the most likely export markets. Any surplus Kazakhstan has will most likely go to these countries,” Zhumagulov told The Astana Times.
He said regional fuel trade was already shifting as Russian supplies faced disruptions.
“The Kyrgyz Republic is having to import gasoline from China, and Tajikistan has also started importing from neighboring countries. Russia previously supplied these markets, but it is now facing problems specifically with gasoline, while Kazakhstan currently has a surplus,” Zhumagulov said.
He expects gasoline exports to be partially permitted for certain resource holders in November.
The disruptions have affected regional trade. In June, Russian jet fuel exports to Central Asia and Afghanistan fell by more than 92% from May to 3,800 tons, while gasoline deliveries declined 34% to 99,300 tons, Reuters reported. Diesel deliveries, by contrast, rose to 237,700 tons.
Hole said Russia’s difficulties reveal a broader vulnerability in Eurasia’s economic geography.
“For decades, Russia’s energy infrastructure and industrial capacity have given it considerable influence over neighboring economies. The disruptions affecting Russian refineries demonstrate that established economic relationships can become sources of vulnerability when infrastructure is exposed to military and geopolitical risks,” he said.
Kazakhstan could use the situation to strengthen its refining capabilities and position in regional energy markets. However, Hole cautioned against treating Russia’s current difficulties as the basis for a long-term export strategy.
“A temporary shortage in Russia does not automatically create a sustainable competitive advantage for Kazakhstan. What matters is whether Kazakhstan uses this period to strengthen its own industrial and institutional capacity,” he said.
The opportunity will depend on whether Kazakhstan can establish a reliable supply base and remain competitive when Russian exports recover. Russia partially eased some diesel export restrictions in October, illustrating how quickly market conditions can change.
Global market pressures add another dimension. In October, the International Energy Agency warned that diesel shortages could persist well into 2027 amid supply disruptions linked to the conflict in the Middle East and attacks on energy infrastructure. Tighter global supplies could increase demand for alternative suppliers, but they also create uncertainty over prices and trade flows.
For Kazakhstan, the immediate opportunity is likely to be regional rather than global. Proximity to neighboring markets can reduce delivery times and transport costs, while established commercial ties can facilitate trade.
“Central Asia offers markets where geographical proximity, established relationships and shorter supply routes may provide genuine advantages,” Hole said.
Still, Kazakhstan must compete on price, product quality, reliability and delivery capability, not merely on the availability of crude oil.
Hole also warned that Kazakhstan’s dependence on export infrastructure passing through Russia creates strategic vulnerabilities. Disruptions affecting the CPC have demonstrated how external conflicts can constrain Kazakhstan’s economic activity even when the country itself is not directly involved.
“If Kazakhstan increases refinery production but remains dependent on a limited number of transport routes, external suppliers or politically vulnerable logistics arrangements, it will have increased production without necessarily increasing its freedom of action,” he said.
Hole argued that Kazakhstan should use the current situation to diversify its energy infrastructure, strengthen strategic reserves, improve domestic distribution and negotiate longer-term commercial relationships across Central Asia.
Balancing domestic needs with export ambitions
Kazakhstan’s ability to become a consistent fuel supplier will also depend on domestic energy policy. The government has repeatedly extended restrictions on gasoline and diesel exports to protect local supplies.
Such measures can help prevent shortages, but they create uncertainty for producers and traders seeking to enter foreign markets. If companies cannot predict when exports will be permitted, it becomes harder to sign long-term contracts or make investments based on regional demand.
According to Zhumagulov, Kazakhstan also continues to import some Russian diesel and aviation fuel. These imports highlight the complexity of the country’s fuel balance: Kazakhstan may have a surplus of certain products while remaining dependent on foreign supplies of others.
Hole noted that Kazakhstan must reconcile its goal of affordable fuel with the commercial conditions needed to sustain investment.
“The government understandably wants affordable fuel for households, agriculture and industry. However, if domestic prices are held artificially low for prolonged periods, refining companies may struggle to justify new investments, while differences between domestic and international prices create incentives for arbitrage and informal cross-border trade,” he said.
In his view, export restrictions may be justified temporarily to protect domestic supplies, but they cannot become the permanent foundation of an internationally competitive industry.
“The state must distinguish between protecting vulnerable consumers and suppressing the economic signals necessary for investment,” Hole said.
He advocated a gradual transition toward more commercially sustainable pricing, supported by targeted social measures and a credible domestic energy security framework.
The relationship between the state and private capital is equally important. While the government can establish strategic priorities and safeguard national energy security, investors need an environment in which companies can compete fairly, including with state-owned enterprises.
