Kazakh oil sails to Azerbaijan – Newspaper Kommersant No. 68 (7513) dated 04/19/2023

Kazakhstan began to increase the tanker fleet for the supply of its oil for export, bypassing Russia through Azerbaijan. But due to the impossibility of using large ships in the Caspian and restrictions on the acceptance of sour oil into the Baku-Tbilisi-Ceyhan oil pipeline, shipments there will not exceed 1.5 million tons in 2023 and are unlikely to exceed 3 million tons in the future. Experts estimate the overall opportunities for diversifying oil supplies from Kazakhstan at 20-25 million tons per year.

Kazmortransflot plans to purchase two oil tankers for operation in the Caspian Sea with a deadweight of 8,000 tons in 2023. According to the Kazakh company, the supplier will be Abu Dhabi Ports Company (UAE). Thus, the Caspian fleet of Kazmortransflot will increase to five ships. Now he owns the Aktau, Astana and Almaty tankers with a deadweight of 12.4 thousand tons each. Transportation in the Caspian Sea has to be carried out by such small vessels due to shallow depths.

Kazakhstan needs new tankers to diversify export deliveries, 80% of which now goes through Russia. Transportation goes along two pipeline routes – through the pipeline of the Caspian Pipeline Consortium (CPC) to the port of Novorossiysk (pumping volume in 2022 – 52.2 million tons) and through the Atyrau-Samara pipeline and further through the Russian territory to the port of Ust-Luga (pumping to 2022 – 8.4 million tons). But last year, supplies through CPC were stopped several times due to repairs in Novorossiysk, and Kazakhstan, taking into account the current political situation, began to actively look for alternative routes. The key among them was the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, but Kazakhstan is forced to transport oil to it by tankers across the Caspian Sea. This year, within the framework of the agreement between Kazmunaigas and Azerbaijani SOCAR, it is planned to send 1.5 million tons of oil from the Tengiz field in this direction. In March, shipments amounted to 20 thousand tons, in April they should grow to 125 thousand tons.

According to Kommersant’s sources, the government of Kazakhstan is discussing the option of a significant increase in supplies through the BTC – up to 20 million tons per year. However, this is hampered by long-term contracts with CPC, under which the “pump or pay” rule operates, as well as the unattractive economics of transportation. Even now, supplies via BTC are more expensive than via Novorossiysk (up to $100 per tonne against $38.4), and their increase requires investments in expanding the Aktau port, deepening the seabed in the Caspian for larger tankers, and increasing the capacity of the BTC itself. Sources of “Kommersant” believe that we are talking about “several tens of billions of dollars.” Some of Kommersant’s interlocutors assure that even Western CPC participants do not intend to lose favorable export conditions. The main shareholders are Transneft – 24%, KTK Company – 7%, Kazmunaigas – 19%, Chevron Caspian Pipeline Consortium Company – 15%, LUKARCO BV – 12.5%, Mobil Caspian Pipeline Company – 7.5 %, as well as BG Overseas Holdings Limited and Eni International NANVSar.l. – 2% each.

The CPC itself, as Kairgeldy Kabyldin, Deputy Director General of CPC-K (Kazakhstani structure of the consortium), said, does not see any risks for itself from the emergence of alternative routes for the export of Kazakhstani oil. According to him, up to 3 million tons of oil from Kazakhstan can now be delivered through the BTC, taking into account the restriction in pumping Tengiz oil due to the high sulfur content. According to Mr. Kabyldin, all alternative routes, as well as directions to Makhachkala, Samara and through Baku to Batumi will be supplied with oil, which was not previously supplied through CPC. The consortium predicts its own pumping for 2023 at the level of 66 million tons.

According to Argus calculations, the total capacity of all alternative routes bypassing Russia, including China, is 20-25 million tons per year. They note both the shortage of pipeline and transshipment capacities in the region, as well as the lack of rolling stock, as well as high transportation costs. At the same time, taking into account the forecasted growth in production at Tengiz by 12 million tons per year, Astana will continue to actively reduce its dependence on transit through the Russian Federation and will increase supplies through the BTC. Also, Argus expects an increase in demand from Kazakhstan for railway tanks, taking into account the shortage of its own fleet.

Olga Mordyushenko