Oct. 2 (Bloomberg) -- Russia will supply Kazakh refineries with 7 million metric tons of crude this year and the same amount in 2013, according to the head of the Central Asian country’s Pavlodar refinery.
Kazakhstan’s Shymkent refinery has already received 2 million tons this year, Pavlodar Chief Executive Officer Shukhrat Danbay said at a conference in Astana today. The two countries will continue talks for an agreement on 2014 supply.
Russia will also provide Kazakhstan with as much as 2 million tons of oil products a year, Danbay said, without being specific on time frame. Kazakhstan, which is in a customs union with Russia and Belarus, will compensate its northern neighbor for export duties it would have received from shipments outside the bloc.
The lost tax revenue will be about $500 million a year and will be reimbursed using Kazakh oil priced at the same level as the refineries paid for Russian crude, he said.
The Pavlodar refinery, which uses crude from Siberia, plans to finish a $1.7 billion upgrade by 2016 so that it will be able to process any grade of oil, he said.
KazMunaiGaz National Co. owns Pavlodar and, together with China National Petroleum Corp., the Shymkent plant.
Pavlodar can process 100,411 barrels a day while Shymkent’s capacity is 160,000 barrels a day, according to data compiled by Bloomberg.
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