It has recently become known that a leading European air carrier, Lufthansa Cargo, has stopped its transit flights through Astana, having preferred the Russian city of Krasnoyarsk. The reason for such a decision is the high prices for jet fuel in the airports of Kazakhstan. Surprising but true — jet fuel in oil-producing Kazakhstan is much more expensive than in oil-consuming Europe.

According Kazakhstan’s Ministry of Transport and Communications data, the prices for jet fuel in the airports of Kazakhstan are 25 percent to 30 percent higher than in Europe. In the fourth quarter of last year, they ranged from USD 650 to 750 per tonne against USD 425 to 500 in the markets of Europe and Asia. Whether Kazakhstan can become as an international transit hub for the air traffic between East and West will depend on the jet fuel prices.

The chairman of the Committee for Civil Aviation of the Ministry of Transport and Communications, Muhit Kubaev, said that the resolution of the jet fuel issue will be key to Kazakhstan President Nursultan Nazarbayev’s idea of development of Kazakhstan’s transit potential.

“If our jet fuel prices are lower, even if by 100 US dollars, than in the airports of Europe and South Asia, we will be able to attract for re-fuelling the aircraft traveling between East and West and to make huge profits from that,” Kubaev said.

For example, it takes about 100,000 tonnes of jet fuel to re-fuel the world’s largest and most popular aircraft like Boeing-747. If over 100 such Boeings fly the air corridors between Europe and Asia daily, it makes 36,400 aircraft a year, which can use over 3.5 million tonnes of jet fuel if they refuel in Kazakhstan. In addition, the airport charges for each stop are about USD 61. “If Kazakhstan’s jet fuel was cheaper that in Malaysia, where, by the latest data, the price per tonne is 420 US dollars, Kazakhstan could receive 2.2 billion US dollars each year,” Kubaev said. Presently, the three Kazakhstan refineries, in their current technical condition, are capable of producing a little more than 400,000 tonnes of jet fuel. Plus, Kazakhstan imports 167,000 tonnes from neighbouring Russia.

At the same time, according to the Committee for Civil Aviation, internal demand for jet fuel in Kazakhstan will almost double over the next two years reaching 895,000 tonnes. However, to become a transit hub, Kazakhstan should produce at least three million tonnes of jet fuel. “Why, we have every ground for that, being an oil producing power. It makes no sense for us to take our crude to far-off lands when we can make oil products from it, including jet fuel, in the necessary amounts and of necessary quality, without spending huge money on imports from abroad. We could even export our products,” the head of the Committee for Civil Aviation said.

But to at least cover the current growing internal demand for jet fuel, it is necessary that the existing plants produce as much as possible. The situation in the domestic refining sector is such that that Kazakhstan has inherited three plants from the USSR. The oldest, in Atyrau, was built in 1945. The Shymkent refinery was built in the early 1970s, and the Pavlodar refinery –in the late 1970s. All these years, little has been done, except in Atyrau, in terms of technical upgrades to the refineries.

Meanwhile, in Europe, they have long been using advanced technologies to maximise the output of oil products from a tonne of crude. This is main secret of fighting the deficit. “To stabilise the prices in the domestic market of oil products, it is necessary to adopt a programme of complete modernisation of Kazakhstan’s three existing refineries,” an officer of Kazakh state oil and gas company KazMunaiGas told New Europe. For example, to bring the national company’s fully owned Atyrau refinery to the leading western standards will take five years and USD 2.5 billion in investment, at current prices. The same will be necessary for the other two plants.

According to the KazMunaiGas official, the national company that represents the interests of the state and of the government, is just at the beginning of the road in that direction. It will need five full years to complete the modernisation and to build a civilised market of oil products in the country.