Kazakhstan, Russia to expand size of Russian gas refinery

Kazakhstan and Russia have agreed to jointly expand the capacity of a Russian natural gas refinery to allow it to process gas from the giant Kazakh field Karachaganak, the Kazakh president said Monday. Nursultan Nazarbayev and Russian counterpart Vladimir Putin agreed on the deal over the weekend during meetings at the Russian Black sea resort of Sochi. Under the deal, each country would own 50 percent of the Orenburg refinery's new unit.

"If we were to build our own gas refinery, it would cost us US$1.5 billion-US$2 billion (1.2 billion-1.6 billion), and the processing of gas would be twice as much at the Orenburg refinery," Nazarbayev was quoted as saying by his press office. Nazarbayev also said that he and Turkish Prime Minister Tayyip Erdogan agreed to build an oil refinery on the Turkey's Black Sea coast in connection with plans to increase the capacity of pipeline carrying oil from Kazakh oil fields to the Russian port of Novorossiisk.

Kazakhstan is working with Russia to more than double the capacity of the 1,510-kilometer (940-mile) Novorossiisk pipeline to 60 million metric tons a year. The pipeline is the main route for exporting oil from Kazakhstan's giant Tengiz oil field. "We will transport our oil from Novorossiisk to Turkey, process it there and then sell," Nazarbayev said. The Central Asian nation is expected to become one of the world's top oil exporters in coming years, aiming to more than double its production to 3 million barrels a day by 2015.

Also Monday, a Russian business newspaper reported that Russia agreed to pay nearly triple the amount it currently does for Kazakh natural gas and plans to partly offset the hike by raising the cost of gas it sells to Ukraine. Kommersant cited unnamed sources close to the negotiations as saying that Moscow agreed to pay US$140 (110) per 1,000 cubic meters of Kazakh gas compared to the US$50 (39) price it paid previously.

The deal come as competition for Kazkhstan's energy resources intensifies. U.S. Vice President Dick Cheney paid a high-profile visit earlier this month to lobby for American energy interests. EU Energy Commissioner Andris Piebalgs also traveled to the Kazakh capital, Astana, to discuss the possibility of a European-bound gas pipeline that could skirt Russia, reports the AP.