OREANDA-NEWS. May 14, 2013. Kazakhstan may become dependent on China-made petroleum products that are supposed to replace Russia-made products, Tengrinews.kz reports, citing Sergei Smirnov, an expert with the Institute for Political Solutions.

According to the recent media reports, Chinese state-owned and private companies are negotiating to purchase stakes in Kazakhstan-based Kashagan oilfield as well as in Nusrultan and Abay oil blocks.

“Kazakhstan has announced its intention to restrict imports of a number of petroleum products from Russia. These Russia-made products are currently dominating the Kazakh market, with the share of Russia-made fuel standing at 40%. The restrictions may be applicable to low-octane AI-80 petrol and summer diesel fuel. At the same time Kazakhstan will boost supplies of petroleum products from China. This will result in China dominating the Kazakh O&G market as compared to Russian, UK and USA companies. Let alone the Kazakhstan’s KazMunaigas National O&G company. This will entail nothing good for Kazakhstan”, Mr. Smirnov believes.

Before the recent China’s attempts to buy stakes in Kazakhstan-based oil assets, the share of China in the country’s O&G industry stood at 25%. In fact the figure might be much higher as foreign investors, notably Chinese investors, may have stakes in Kazakhstan-based companies through entities registered in offshore zones (…) and the true owners may not be disclosed”, according to Mr. Smirnov.

He believes the current share of China in Kazakhstan’s O&G exceeds the officially announced 25%. “Should we take into account China’s intention to enter Nursultan and Abay offshore oil projects, the share of China may exceed 50%”, Mr. Smirnov said, adding that the country’s Oil Ministry plans to send up to 1.5 million tons of oil to China within tolling contracts.

A tolling agreement is an agreement to put a specified amount of raw material per period through a particular processing facility

Last week Minister Mynbayev said that ConocoPhillips’s stake in the giant Kashagan oilfield (8.4%) might be sold to China. According to him, Indian’s ONGC (a possible purchaser of the stake), only has a chance to buy in case there is a lobbying effort on the part of Russia or the USA.

According to Mr. Smirnov, India is ready to overpay USD5 billion for the stake, adding that “China might overpay more”.