Russian oil to reach China via Kazakhstan

Jun 11, 2014 12:00 AM

The Lower House of the Kazakh Parliament (Majilis) has adopted a draft law to ratify the agreement between Kazakhstan and Russia on cooperation in transportation of Russian oil to China through the territory of Kazakhstan, Tengrinews reports.

According to the Majilis Committee for International Relations, Defense and Security of Kazakhstan, the countries are creating a legal framework for long-term transportation of Russian oil in the amount of 7 million tons per year with an option of increasing the amount to 10 million tons per year. Under the agreement Russia is getting access to the oil pipeline system of Omsk (Russia) - Priirtyshsk (Kazakhstan) - Atasu (Kazakhstan) - Alashankou (China).

“The cost of oil transportation in the amount of 7 million tons per year along the route is approved for the entire term of the agreement by the authorized state body of Kazakhstan in US Dollars per one ton on the basis of agreements of the organizations authorized by the parties," the Committee said.

The transport company representing Kazakhstan is entitled to substitute the Russian oil with Kazakh oil in the oil pipeline system, provided that the authorized organization of the Russian side will receive the oil in the same amount and same quality in the final destination of the transportation route (Alashankou).

“The agreement is very beneficial for us. Now we are getting 5 million tons of oil from Russia. The agreement will enable us to swap it for our oil, equal in quality and in volume. This will keep our refineries fully loaded, and we will be able to meet the demand of our domestic market for oil products,” Minister of Oil and Gas Uzakbai Karabalin said during the plenary meeting of the Majilis.

The value added tax on oil transportation services along the whole Kazakh section of the pipeline is set to zero. Whereas to compensate for the value added tax in accordance with the tax legislation of Kazakhstan, the Kazakh side qualifies the oil transportation services as international transportation.

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