A mid-level Kazakh delegation visited Iran’s northern province of Mazandaran last month. It was greeted by the regional head of industry, mining and trade, Mohammad Mohammadpour. The local media reported that talks had focused on the deepening of bilateral cooperation and, in particular, with regard to a special economic zone in the port of Amirabad.
Mohammadpour said that the two countries were considering the joint construction of an oil refinery at the port to import Kazakh crude for both processing and exports via the Persian Gulf. He said that a construction permit had already been delivered and a land plot chosen.
This is not the first time that Iran and Kazakhstan have considered refining Kazakh oil in Iran and exporting the surplus. In October 2015 the deputy governor of the western Mangistau region, Rakimbek Amirzhanov, spoke in an interview about a possible fourth oil refinery on the Caspian Sea with a total annual capacity of 6 million–12 million tonnes of crude (see Caspian Focus – October 2015). He had floated the same idea in July 2015, telling the media at the time that the central government was in direct talks with Iran.
According to the plan, not mentioned again since, the fourth refinery would enable Kazakhstan to slash transport costs for its oil exports by tapping the northern Iranian market instead of using the traditional Black Sea route.
Amirzhanov reasoned that, as an alternative or perhaps as well, Kazakhstan could sell more crude to China, using its refurbished railway infrastructure linking the Caspian to Xinjiang. It appears, however, that that the new proposal is a small-scale refinery to process limited volumes of crude oil that Kazakhstan could ship to its southern neighbour by tanker.
By comparison, a Kazakhstan-based refinery would be more profitable, and would allow connection to the pipeline network of the Caspian Pipeline Consortium (CPC), the China-bound Atasu-Alashankou pipeline or the national rail system. The Iran-based option as suggested by Mazandaran province officials would clearly not have the same economies of scale. Before any practical details are settled, the issue of financing needs to be resolved. Given the lack of information regarding the trilateral Kazakhstan-China-Iran fourth refinery blueprint, there seems to be good reason to believe that funding will not be forthcoming.
