Kazakhstan says Russia Ready to Offer Lower Rates on Natural Gas

Russia is willing to sell natural gas to Kazakhstan at reduced rates, which are lower than prices offered to Belarus and significantly below other European countries, said Kazakh Energy Minister Almasadam Satkaliyev.

“Russia's Gazprom gives us gas at a price much lower than, say, Belarus,” Satkaliyev informed reporters on Wednesday after talks with Russian energy giant Gazprom on gas supply to northern and eastern Kazakhstan.

Currently, Belarus purchases Russian natural gas at $128.5 per 1,000 cubic meters. Last year, the price stood at $127 per 1,000 cubic meters.

Belarus also serves as an important transit route for Russian oil and gas to Europe, its main gas consumer. Russia supplies nearly 39 billion cubic meters (bcm) of its natural gas to Europe, mostly to Germany, via the Yamal-Europe gas pipeline crossing Belarus.

“Russia understands that effective work is possible only in the two-way mode and meets us halfway by offering the price that is way lower than European prices and much lower than the price on the Russian-Belarusian border,” Satkaliyev said.

He noted that Gazprom and Kazakhstan's QazaqGaz had held several meetings to discuss gas supply to northern and eastern Kazakhstan, and that they have a tentative plan and route for constructing new gas pipelines from Russia.

The Kazakh energy minister explained that gas will be supplied from the Kashagan and Karachaganak fields, the Beineu-Bozoi gas pipeline, and through additional pipelines constructed by Gazprom.

The pipeline may be extended to China in the future, Satkaliyev said, but added that currently the focus is on meeting the gas needs of Kazakhstan.

Kazakh Prime Minister Alikhan Smailov has asked the Energy Ministry and the Samruk Kazyna Sovereign Wealth Fund to prepare a final decision on gas supply to northern and eastern Kazakhstan by May 1.

The oil and gas industries are the main pillars of Russian and Kazakh economy as both countries are flush with hydrocarbons. The two post-Soviet nations have maintained strong partnerships in the energy sector through already existing close economic, technological and transportation initiatives.

However, relations between the close allies took a hit after President Kassym-Jomart Tokayev said Kazakhstan will not recognize the independence of the Donetsk and Luhansk regions of Ukraine.

Kazakhstan also did not assist Russia in circumventing Western sanctions, prompting aggressive rhetoric by certain Russian politicians.

Meanwhile, energy relations between the two Caspian neighbors may expand cooperation on gas consumption and transportation infrastructure for both domestic and foreign markets.

Last year, Tokayev and his Russian counterpart Vladimir Putin discussed prospects for Russia, Kazakhstan and Uzbekistan to establish a Russia-initiated “trilateral gas union.”

Kazakhstan has over three trillion cubic meters of natural gas reserves, while Uzbekistan has 1.8 trillion cubic meters. The countries annually produce over 30 and 50 bcm of gas, respectively.