Priceless black gold
The oil and oil products sector is more predictable and is unlikely to change in the foreseeable future: Russia supplies hydrocarbons to all CA countries, while only Kazakhstan of the Central Asian countries has significant oil reserves (although it does not own most of the extracted oil).
In 2024, oil and gas condensate production in the Republic of Kazakhstan amounted to 87.8 million tons, of which two thirds are produced at Tengiz, Kashagan and Karachaganak. The largest fields (called “whales”) are developed by American and European companies under production sharing agreements and stabilized contract (for Tengizchevroil). Of the remaining “non-whale” production, 18 million tons are sent for domestic refining (at subsidized prices of $20-25 per barrel). About 12 million tons are exported by private companies mainly in the European direction, which allows balancing the economics of domestic supplies to some extent.
At the same time, refining volumes are insufficient for Kazakhstan's growing economy, and Russia supplies about 1 million tons of various oil products (gasoline, diesel and jet fuel, bitumen/hydrone, and in the coming years, most likely, will supply liquefied gas). Obviously, without Russian fuel supplies, it would not be possible to meet the needs of either Kazakhstan or other CA countries.
Taking into account the growth of consumption in Kazakhstan, it is planned to expand the capacity of the Shymkent refinery (a joint venture of the national company KazMunayGas and the Chinese CNPC) from 6 to 12 million tons per year with an investment of $5 billion, but the project will require additional free volumes of crude oil, which Kazakhstan does not have. In this regard, it was planned to “persuade” large foreign consortia to start supplying the domestic market, which is certainly not in their interests - neither geopolitical nor economic.
The postponement of plans to create a single market for oil, oil products and gas from January 1, 2025 for two years is due to a number of factors: Kazakhstan's unpreparedness to equalize domestic fuel prices with EAEU countries (now 20-50 percent cheaper), sanctions restrictions on Russian exchanges where energy resources were to be traded, as well as the lack of elaboration of integration documents of the member countries in the fuel sector.
I should note that one of the key goals of creating a single market was transparent pricing on exchange platforms. At present, unfortunately, both exports and even domestic supplies are based on quotations from foreign price agencies Argus and Platts**.** The launch and full-fledged functioning of the EAEU exchange trading on the platform of JSC Saint-Petersburg International Mercantile Exchange could become a real mechanism of price formation both within the region and in foreign markets. It should be recognized that the mechanism of unilateral sanctions and the fear of the region's countries to fall under secondary sanctions may postpone the introduction of a single market and exchange trading for a more distant future.
The power of energy
The situation in the region's power sector looks challenging. Kazakhstan is facing a growing deficit. In the article Let's Thank Russia for Our Bright Present I cited some data. In December 2024 the total generation in Kazakhstan amounted to 15.6 GW. At the same time, over 1.4 GW was imported. Thus, imports exceeded 9 percent of generation.
According to the official forecast of the Ministry of Energy of Kazakhstan, by 2030 the country will face a capacity deficit of over 6 GW **(**22 GW of generation and over 27.2 GW of demand), while the entire CA region will face a deficit of 9 GW. This is the capacity of about four nuclear power plants with two Russian VVER-1200 reactors.
I note that relying on overflows from Russia may not save the country during peak periods of consumption growth, as the capacity/capacity of transmission lines from north to south is no longer able to support the increasing volumes. Hence, it is easy to predict an increase in the number of large-scale outages and blackouts, similar to 2022, when an outage affected the power systems of three countries at once: Kazakhstan, Uzbekistan and Kyrgyzstan.
The main emphasis in overcoming the deficit in Kazakhstan is placed on the RES sector, mainly on large-scale gigawatt projects in solar and wind power with foreign partners (Europe, Middle East, China), while delaying the construction of a nuclear power plant, although it has already become clear to everyone that it is necessary to build at least three nuclear power plants in parallel - in the south, north-east and west of the country. In my opinion, the recently imposed personal sanctions against the management of Rosatom State Corporation may serve as a reason for Kazakhstan to choose other technology suppliers (is this what the country has been waiting for?).
Against the backdrop of impending energy problems in the region, unique ideas are emerging. For example, construction of a power transmission line to import electricity from China (through the mountains?). The authors apparently do not understand the energy picture as a whole – does it make sense to sell gas and then buy electricity thousands of kilometers away? Then there is the project of laying an underwater energy cable under the Caspian Sea between Azerbaijan, Kazakhstan and Uzbekistan, about which a trilateral memorandum was signed in Tashkent on May 1, 2024.
Summarizing the first material on the situation in the fuel and energy complex of Central Asia, I would like to highlight the main theses and proposals:
Central Asian countries in the fuel and energy sector continue to rely on Russia as a big external powerbank that will always be able to balance consumption and deficit of fuel and energy resources.
The transition to the full functioning common markets for oil, oil products, gas and electricity should be completed by 2027, which requires the intensification of integration processes in the EAEU countries.
Increasingly complicated conditions of cooperation and even bank payments raise the question of empowering/creating a bank for settlements in the EAEU and Central Asia. A link in the form of exchange trading and a bank specifically in the energy sector can become a tool for the formation of their own shop quotations and settlements.
Sanctions hysteria and the threat of falling under secondary sanctions may lead to a decrease in imports of fuel and energy resources from Russia to Central Asia, which will create difficulties for further economic growth in the region (similar to the EU countries).
Currently, various national strategies for the development of industries in the countries of the region and the EAEU are built without taking into account the strategies of neighboring countries, including in the energy system.
The population of Central Asian countries continues to grow and is projected to increase from the current 81 million to 100 million by 2050, which, against the background of depleting hydrocarbon resources, will require increased imports of fuel and energy from Russia.