KAZAKHSTAN - Oil Refining Sector & Other Industries.

Kazakhstan has three oil refineries - at Pavlodar, Chimkent and Atyrau - with a combined capacity of over 427,000 b/d. One of the refineries has been leased and another has been privatised under controversial deals involving little known companies. The downstream oil sector has not been expanded

A law issued in 2001 regulates oil refining and the sale of oil products in the country. It specifies the minimum volumes of crude oil to be processed by the refineries and gives the government the right to schedule their maintenance.

Oil products from the Atyrau refinery, which is still controlled by the state through KazMunaigaz (KMG), the integrated giant into which all state companies in the petroleum sector including KazakhOil were merged in February 2002, have been sold below cost to local farmers during the sowing seasons as the agricultural sector needs cheap fuel. In April 1998, for example, Kazakhstan President Nursultan Nazarbayev abruptly dismissed KazakhOil's CEO Baltabek Kuandykov because the latter had allowed oil product prices to be raised just before the sowing season.

The pace of investment in the oil refining sector is slow. This is due to a number of factors, ranging from domestic political manoeuvring and an aversion to foreign companies to the government's lack of experience in the ways of global business. Little known firms have purchased state assets only to have the sale reversed once the government realised they were no more than small companies operating out of tax havens and trying to make a quick profit.

Yet the future prospects for Kazakhstan are good. The diversified industrial base in the country inherited from the Soviet era has been gradually revived, and significant foreign capital has moved into key sectors, such as steel and aluminium. The government's aim is to create new industries so that Kazakhstan begins exporting goods that are manufactured or processed. Currently, most of Kazakhstan's exports comprise commodities - primarily oil, metals, phosphates and grain.

The prospects for expansion in basic industries are huge. Apart from its hydrocarbon resources, Kazakhstan is rich in uranium, gold, iron ore, chrome ore, nickel, cobalt, lead, uranium, bauxite and aluminium oxide. The country has the world's largest reserves of zinc, wolfram, barite and molybdenum, and it is estimated to have about 25% of the global uranium reserves. It has the world's third largest reserves of copper and manganese.

During the Soviet era, Kazakhstan accounted for nearly 20% of the USSR's output of coal and half its reserves of lead, tungsten, copper and zinc. Kazakhstan has large deposits of titanium, magnesium, chromium and phosphates which are mined and processed in the country. It also processes iron ore, bauxite and aluminium oxide.