“Exchange games” will show what problems the industry will face in exchange trading – Daniyar Abulgazin

Since 2019, sale of oil products produced at Kazakhstani refineries for the domestic market through commodity exchanges has been planned in Kazakhstan. The main idea is to make the process of fuel distribution transparent and to minimize the participation of the state in this process.

Daniyar Abulgazin, Chairman of the Oil and Gas Industry Committee of the Presidium of the Atameken NCE of the Republic of Kazakhstan, noted that the market is not against exchange trading. But it is necessary to eliminate conflicts in the legislation and be more careful about the choice of exchange platforms.

According to Vice Minister of Energy of the Republic of Kazakhstan Asset Magauov, 18 commodity exchanges are too many for effective organization of trading. Also, the industry government agency insists on strict qualification requirements for exchanges admitted to trading.
“We are talking with the Ministry of Trade that we need to select exchanges, as the bidders must be confident in their reliability. We, as the line ministry, are ready to approve the norms for the commission for the selection of exchanges ourselves, but there are disagreements. The rules must be approved by the MIT RK, and the exchange trade belongs to the new agency (AZRK RK),” Aset Magauov said during the meeting of the Committee.

The plan of measures to implement the message of the Head of State dated 01.09.2020 expanded the list of oil products for exchange trading. At the same time, according to the Law of the Republic of Kazakhstan “On Commodity Exchanges”, the sale outside commodity exchanges of products included in the list of exchange commodities may be invalidated.

“This is a collision in the legislation, which also needs to be considered together with interested government agencies,” the Vice Minister of Energy of the Republic of Kazakhstan noted.

Daniyar Abulgazin emphasized that in order to stabilize prices and attract players to the exchange, a normal economic instrument for setting prices is needed, which should take into account all costs: for production, delivery of raw materials to the plant, production, delivery of oil products to bases and then to retail.

“By the end of the year, it is necessary to conduct “exchange games” in order to look at the results and, based on them, to finalize the legislative base, to see what gaps there are. We need to bring the level of exchange trading up to 10-15%, otherwise we will not reach objective price indicators,” commented Daniyar Abulgazin.

During the meeting of the Oil and Gas Industry Committee, the issue of the draft of the new edition of the Environmental Code of the Republic of Kazakhstan was raised. In particular, the oil and gas and metals industries are concerned that the accompanying bill will be considered separately from the draft Environmental Code.

“The Code is planned to be adopted at the end of this year, we will have a 5-year transition period for the implementation of BAT. However, I would like to start discussing amendments to the accompanying bill from the beginning of next year, as the industries must be ready for changes,” said Bulat Akchulakov, General Director of the KAZENERGY Association.

Evgeny Bolgert, Deputy Chairman of the Board of the Atameken NCE RK, noted that the NCE had prepared a letter with the position of the branch Committees of the NCE and associations addressed to Prime Minister of the Republic of Kazakhstan Askar Mamin. In the near future, a schedule will be agreed for discussing the most sensitive amendments to the environmental legislation for business.
Also during the meeting, the issues related to the use of control metering devices (CMD) by retail distributors of petroleum products were discussed in detail.

“Now the operator of the KPU is NIT JSC, and we started to have problems. At the moment when we need to verify the data transmitted to the system with our actual indicators, NIT refers to the need to conclude contracts for the maintenance of the CMD with a monthly subscription fee of 4,150 tenge for each CMD. Entrepreneurs are issued fines for the fact that the data is not in the SRC database or they are received untimely. We calculated, taking into account that at each gas station there are from 3 to 8 CMD units, and the number of gas stations in the country is more than 3.300, then, accordingly, the size of the annual subscription fee will be about 1 billion KZT. For example, only for our company, the monthly fee can exceed 100 million KZT per year. Ultimately, this may negatively affect the cost of products for the end user,” said Tulemis Shotanov, General Director of PetroRetail LLP.

Entrepreneurs also note that the CMD does not give the correct result, since they do not take into account all the technological features, and the error in the indicators is very high. In regions with weak Internet there will be problems with data transfer to the system.

Summing up, Daniyar Abulgazin emphasized the need to organize a detailed discussion of this issue on the site of the National Chamber with the participation of market representatives, the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan and NIT JSC.
“As time goes on, in accordance with the requirements of the law on state regulation of the production and turnover of certain types of oil products, a full transition to the CMD should be carried out already from 2021. Let’s hold a meeting in the next two weeks and try to resolve controversial issues,” Daniyar Abulgazin concluded.