Kazakhstan set to complete upgrade of its oil refineries

MOSCOW, June 6 (Reuters) - Kazakhstan is set to rival Russian firms in the lucrative Central Asian fuel market once it finishes upgrading its oil refineries, officials in Astana and industry sources said.

The government is considering halting light oil product imports from Russia and lifting a ban on such exports that was originally imposed to ensure reliable supplies on the domestic market, they said.

Astana has been looking at selling into other former Soviet republics and beyond - a market dominated by Russia - for some time. "Central Asia and Afghanistan are the key markets for Kazakhstan," Energy Minister Kanat Bozumbayev said last year.

But now Kazakhstan - the region's second biggest crude oil producer after Russia - is achieving a surplus over its own gasoline and diesel needs, meaning it can start acting on the idea.

Kazakhstan is rapidly expanding production at its three large refineries. It has completed upgrading the Pavlodar plant, with work at Atyrau and Shymkent expected to be finished soon, the energy ministry said in response to Reuters questions.

The plants' combined annual oil products output will increase by eight percent to 15.3 million tonnes this year, while gasoline and diesel production will exceed Kazakhstan's domestic demand by 1.5 - 2.0 million tonnes per year, the energy ministry said.

Despite producing 1.74 million barrels of crude per day, Kazakhstan has long imported oil products from its former Soviet-era master Russia due to the past lack of refining capacity. These amount to around 1.7 million tonnes a year.

Its ambitions mark another step away from Moscow for Kazakhstan, where around 85 percent of the population are fluent Russian speakers, but which is planning to a switch to a Latin-based alphabet from Cyrillic.

MARKET SURPLUS

Kazakhstan has already faced overproduction of gasoline this year, which has led to lower prices.

Aiming to remove the surplus, the government plans to ban imports of the popular A-92 grade of gasoline and secure a deal to supply neighbouring Kyrgyzstan, the energy ministry told Reuters in an email.

"The government wants to start active discussions of these issues in parliament in June," a source close to the government said.

According to the energy ministry estimates, imports of Russian A-92 gasoline reached 386,000 tonnes in January-April, surpassing the plan of 280,000 tonnes.

For the whole of 2018, Russia is set to supply 800,000 tonnes of gasoline, 520,000 tonnes of diesel and 300,000 tonnes of jet fuel to Kazakhstan as Moscow raises exports due to its own extensive refineries modernisation.

Kazakhstan, in its turn, may export 200,000-300,000 tonnes of gasoline this year, increasing to 500,000 tonnes in 2019, according to industry sources and Reuters calculations.

Combined annual imports of light oil products by Kyrgyzstan, Tajikistan and Afghanistan stand at around 3.7 million tonnes. Kazakhstan's energy ministry declined to comment on the figures.

Russia's Rosneft, Gazprom Neft and privately-owned Forteinvest are the main players on the Central Asian fuel market. Spokespeople for all three companies declined to comment.

However, a source at Gazprom Neft, which has a network of gasoline stations in the region, said that the company may consider buying gasoline and diesel from Kazakhstan if it is more profitable than shipments from Russia. (Writing by Vladimir Soldatkin; editing by David Stamp)

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