Desperate for Fuel, Russia Looks to Kazakhstan for Refining Capacity

Russia is running short of undamaged oil refinery capacity, and it’s looking to Kazakhstan for help.Kazakhstan said Thursday that it is in talks with Moscow to process Russian oil at Kazakh refineries, sell some of the resulting fuel domestically, and send a portion back across the border to Russia.No volumes, commercial terms, or refineries have been named. Kazakhstan’s Energy Ministry said market participants would decide where the products go.For Kazakhstan, Russian crude would help keep its refineries running at stable rates while adding fuel to the domestic market.For Russia, the route is less elegant. It would export crude, pay a neighbor to refine it, and then import the gasoline or diesel it can no longer reliably produce at home.Ukraine has spent months attacking Russian refineries, storage sites, export terminals, and other oil infrastructure. The latest round included the Omsk refinery, Russia’s largest, located deep in Siberia near the Kazakh border.The damage has created fuel scarcity in several Russian regions and pushed Moscow to make aggressive moves to control the market. On Thursday, the government extended its restrictions on gasoline and diesel exports through January 31, 2027, after just last week it described the diesel ban as a temporary measure it would lift once supplies recovered.Kazakhstan has already started supplying some refined products to Russia. Processing Russian crude would expand that workaround, although the ministry has not said how much spare capacity Kazakhstan has or how much fuel could be returned.The plan would do little to loosen the global diesel market. Fuel kept in Kazakhstan or shipped back to Russia is fuel that will not reach buyers elsewhere, where supplies are already tight after refinery outages in Russia and the Middle East.There is no deal yet, and Russia is not short of oil. It is, however, short of working refineries, and it’s now looking across the border at someone else’s.By Julianne Geiger for Oilprice.comMore Top Reads From Oilprice.comIran Rejects Oman’s Proposal to Evenly Divide Hormuz ControlUK Regulator Targets Data Center Land Grab on the Power GridRefined Fuels, Not Crude, Are Driving the Oil Market Crunch