Tatneft, a Russian oil and gas company, has withdrawn from plans to build a butadiene rubber plant in Kazakhstan, despite being prepared to invest $1 billion in the project just six months ago.
The news is discouraging for Kazakhstan’s petrochemical sector. What exactly happened? Why did the Russian company abandon the project? Will it still go ahead? And if so, who will take it over? These are the questions that naturally arise when an investor withdraws from a project announced five years ago and expected to become part of a value-added production chain.
What stage was the project at?
The Russian company has exited the “Butadiene” project. It previously held a 75% stake in LLP “Butadiene” (the project operator), while the remaining 25% had been transferred to it under trust management by Samruk-Kazyna Ondeu.
Initially, when LLP “Butadiene” was established in November 2021, 25% belonged to the national company KazMunayGas (KMG) and 75% to Tatneft. In 2023, KMG sold its stake to the Samruk-Kazyna Sovereign Wealth Fund for KZT 8.5 billion. That same year, the Fund transferred the stake to its subsidiary Samruk-Kazyna Ondeu for the same amount, which subsequently placed it under Tatneft’s trust management. As a result, the Russian company obtained full control over the project, which was valued at nearly $1 billion.
In October 2024, Butadiene signed a contract with China Tianchen Engineering Corporation for the development of the Extended Basic Design (EBD). The Chinese engineering company was tasked with preparing project documentation adapted to Kazakhstan’s standards and requirements.
“We are confident that the experience and expertise of our partners at China Tianchen Engineering Corporation will allow us to complete all tasks on time and at a high level,” said Chingiz Surtaev, CEO of LLP “Butadiene,” at the time.
In July 2025, Tatneft made its Final Investment Decision (FID), and in December the operator planned to select an EPC contractor, which would have marked the project’s transition into its active implementation phase.
The plant was expected to create more than 2,000 jobs during construction and 700 permanent jobs during operation.
The facility is located within the Special Economic Zone “National Industrial Petrochemical Technopark” (SEZ NIPT), approximately 40 km from Atyrau. It was planned to produce 186,000 tons of butadiene rubber and 170,000 tons of isobutane annually.
Part of the output was to be supplied to Tengri Tyres, a tire plant located in Saran, Karaganda region — a joint venture between Kazakhstan’s Allur Group and PJSC Tatneft. The tire plant, with a capacity of 3.5 million tires per year (passenger and truck), was built in 2021–2022 and is expected to reach full capacity next year.
The tire project cost KZT 228 billion. Notably, KZT 66.4 billion was provided by Kazakhstan’s Industrial Development Fund, and KZT 31.2 billion by the Saryarka Social and Entrepreneurial Corporation. Thus, at least 43% of the plant’s construction was financed through public funds, excluding private and infrastructure contributions.
The Butadiene project also received significant preferences. It is located in SEZ NIPT, which already has state-funded infrastructure. SEZ participants are exempt from corporate income tax, land tax, property tax, and land use fees. A zero VAT rate applies to imports of raw materials and goods required for the project, customs duties are waived, and procedures for hiring foreign labor are simplified.
In November 2022, LLP “Butadiene” and Tengizchevroil (TCO) signed a feedstock purchase agreement. Under the contract, the Tengiz operator committed to supply 380,000 tons of butane annually at a preferential price — more than twice cheaper than global market levels.
Why did Tatneft withdraw?
A $1 billion investment is substantial even for a major oil company like Tatneft. While the company’s intentions attracted attention, some believe Tatneft did not intend to fully finance the project independently and sought concessional financing from Kazakhstan, to be repaid by the plant during operation. Allegedly, the government’s refusal to agree to such a scheme led Tatneft to exit.
Another possible factor is Western sanctions. On December 18, the UK Treasury added 24 companies to its consolidated sanctions list, including Tatneft. Sanctions complicate access to financing and Western technologies, which are critical for gas-chemical plant construction.
Who controls the project now?
As of January 30 this year, 99.999% of LLP “Butadiene” belongs to Samruk-Kazyna Ondeu, a subsidiary of Samruk-Kazyna, and 0.001% to SSAP, a joint venture owned 90.11% by Samruk-Kazyna Ondeu and 9.89% by Kazatomprom.
SSAP operates the Stepnogorsk Sulfuric Acid Plant, which purchases sulfur from TCO and resumed production after reconstruction in 2015.
The Fund states that the Butadiene project is proceeding as planned. All previously declared key parameters — including strategic importance, production indicators, and socio-economic impact — remain unchanged. The project is expected to be implemented between 2023 and 2027.
No additional comments have been provided by Tatneft or its Kazakh partners.
The main question remains: can Kazakhstan implement the project independently?
Expert opinion
Askar Ismailov, oil and gas expert:
“In my view, Tatneft’s withdrawal from the Butadiene project is due to a combination of factors. Sanctions were likely the key catalyst. They significantly complicate access to financing and technology. Sanctioned companies face near-impossible borrowing conditions in international financial institutions.
Under the framework agreement, Tatneft was responsible for attracting project financing and securing an offtake contract for 100% of output under Take-or-Pay terms. Even with successful commissioning, product sales posed a challenge.
Project costs also increased year by year. Independent estimates suggested actual capital expenditure was significantly higher than publicly stated. This discrepancy may have influenced delays and reconsideration of participation.
Additionally, a serious accident occurred in October in Turkey’s Kocaeli province at a facility where Tatneft and GEBKİM had previously agreed to invest in maleic anhydride production. Two workers died. Naturally, Tatneft’s attention shifted to resolving that crisis, pushing the Kazakhstan project to the background.
It would be incorrect to say the project will now be implemented solely by Kazakhstan. The country can bring the project to high readiness and resolve infrastructure and legal issues. However, technological execution, EPC contracting, product marketing, and commercial optimization require a strong external partner.
Petrochemistry demands not only financial resources but highly qualified human capital. Kazakhstan has very few specialists with practical experience in such projects — insufficient for full-scale plant construction and launch.”
Other Tatneft projects in Kazakhstan
In addition to the tire plant, Tatneft participates in at least two major projects: the Karaton Subsalt exploration block and the Condensate refinery.
The Karaton Subsalt project is being implemented jointly with KMG, with Tatneft fully financing exploration.
In February 2024, Tatneft acquired 50% of Karaton Operating for $18.2 million.
On February 2 this year, KMG announced a gas flow from the first deep exploration well. Further testing is planned. Drilling began in November 2024 and was completed in December 2025 at a depth of 5,750 meters. Testing involves high pressure and hydrogen sulfide challenges.
KMG previously projected oil production to begin in 2028 at 2.5 million tons per year.
In 2024, Tatneft became co-owner of the Condensate refinery in Western Kazakhstan. As of early 2025, it owned 72.4% of the refinery.
The refinery has faced financial difficulties due to feedstock shortages, operating at only 15–20% capacity in 2023–2024. Net losses exceeded KZT 8 billion in 2024. Debt to the Development Bank of Kazakhstan exceeded KZT 22.4 billion and $50.5 million.
The refinery’s design capacity is 850,000 tons per year.
With new investors such as Tatneft and, reportedly, the Allur Group coming on board, and with feedstock supply issues resolved, the plant may finally see improved performance.