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Kazakhstan is bracing for a significant shift in energy costs as the era of cheap natural gas comes to an end. A recent announcement that wholesale prices will increase by 33% starting July 1 has sparked public concern, but industry experts explain the underlying reasons for the impending price hikes.

Industry Losses Mount

According to oil and gas analyst Olzhas Baidildinov, the gas sector in Kazakhstan has been operating at a loss for many years. The majority of domestically produced gas, approximately 85%, comes from major fields like Karachaganak, Tengiz, and Kashagan. While purified gas from these fields is sold by producers for around $50-$55, the national operator, QazaqGaz, supplies it to its subsidiary, QazaqGaz Aimaq, at a heavily subsidized rate of $20-$22. This practice was intended to keep gas prices affordable for consumers.

Subsidies Reach Critical Levels

Baidildinov estimates that the annual loss incurred to maintain these subsidized prices reaches between $400 million and $500 million. Previously, these deficits could be covered by revenue from gas exports and transit. However, increased domestic consumption has led to reduced exports, forcing Kazakhstan to import approximately 5 billion cubic meters of gas annually from Russia.

Price Adjustments Necessary

The expert highlighted that plans to double wholesale prices over three years were approved back in 2023. However, Baidildinov believes even this increase is insufficient to cover the industry's losses. He argues that prices need to be tripled to achieve financial stability.

"The era of cheap energy carriers in Kazakhstan has ended," stated the expert. While wholesale prices are increasing, this does not mean retail prices will immediately jump by the full 33%. Consumers are expected to feel the impact of the price rise during the winter heating season, likely in November-December.