Kazakhstan prolongs ban on exports of LPG, propane, butane

Kazakhstan’s Energy Minister Almassadam Satkaliyev has signed a decree imposing a ban on exports of liquefied petroleum gas, propane, and butane via road and rail transport.

“Introduce a ban on the export of liquefied petroleum gas, propane and butane by road and railway transport from Kazakhstan for six months,” the decree says, Caliber.Az reports, citing Russian media.

However, there are certain exemptions to the export ban, including exports by subsoil users who have produced liquefied petroleum gas (LPG) under product-sharing agreements or contracts approved by the president of Kazakhstan, as long as they maintain a stable tax regime.

Additionally, exports of goods made from Kazakh raw materials sourced from the Karachaganak field are permitted under international treaties.

Besides, the exemption to the export ban applies to transit shipments that start and end outside Kazakhstan, as well as exports related to humanitarian aid programs, as determined by the Kazakh government.

This decision comes as part of Kazakhstan’s ongoing efforts to manage domestic energy resources and ensure the stability of its energy sector amidst growing demand as in 2023, the country decreased its liquefied petroleum gas (LPG) exports further, driven by rising domestic demand and a shortage of motor fuels.

To recap, in July this year, certain media reports said that the Kazakh government increased the cap on wholesale LPG prices by 12% to 45,158 tenge/t ($100.4/t) excluding value-added tax (VAT) from July 1 to reduce losses for producers selling on the domestic market.

The regulated price ceiling is much lower than the cost of LPG production so plants incur losses of 20,000-30,000 tenge/t ($40-$60/t) and producers are reluctant to raise output, the energy ministry says. LPG demand rose by 400,000t, or 28%, in Kazakhstan last year, driven by higher feedstock use at petrochemical firm KPI's 550,000 t/yr Atyrau propane dehydrogenation (PDH) plant and growing autogas sales. The government partially banned LPG exports in November 2023 for six months to prevent a domestic shortage, which was extended in May for a further six months.

The government-regulated price ceiling for LPG in Kazakhstan is considerably below the production cost, resulting in losses of 20,000-30,000 tenge per ton for production plants, which has led to hesitancy among producers to increase output, according to the Ministry of Energy.

Last year, LPG demand in Kazakhstan surged by 400,000 tons, or 28%, mainly due to higher feedstock consumption at the KPI's 550,000-ton-per-year Atyrau propane dehydrogenation (PDH) plant and increased autogas sales. To avoid a domestic shortage, the government imposed a partial six-month export ban on LPG in November 2023, which was later extended for another six months in May 2024.

By Khagan Isayev