Kazakhstan increases oil supplies to Azerbaijan via Turkey and Georgia

Kazakhstan has agreed with Azerbaijan to increase oil transit through the country, bypassing Russia, from 1.5 million to 2.2 million tons per year via the Baku-Tbilisi-Ceyhan pipeline. In the future, transportation volumes should increase to 3 million tons. Baku, against the backdrop of a decline in its own oil production, also plans to purchase Kazakhstani raw materials to load its refineries. Experts note that transit through Russia remains the most profitable option for Kazakh exporters.

National oil company of Kazakhstan “Kazmunaigas” and state oil company of Azerbaijan SOCAR signed agreement to increase the volume of transit of Kazakh oil through the Baku-Tbilisi-Ceyhan pipeline from 1.5 million to 2.2 million tons per year. The document involves negotiations on reducing tariffs for the transportation of raw materials from the Kazakh port of Aktau on the Caspian Sea, from where the raw materials are then transported by sea to Baku, to the Turkish port of Ceyhan on the Mediterranean coast. It is also expected to discuss the pumping of Kazakh oil along the Baku-Supsa route for subsequent shipment through the Georgian port of Poti. In addition, the parties signed a memorandum establishing the general conditions for the supply of Kazakh oil to the SOCAR refinery.

Since 2022, Kazakhstan has been striving to diversify its oil export destinations, more than 85% of which is now in transit through Russia. In particular, Astana plans increase supplies through Azerbaijan to 3 million tons per year over the next two years.

In parallel, Astana negotiates with Germany to increase shipments there through Russia via the Druzhba oil pipeline to 2 million tons already in 2024 (the current agreement assumes a volume of 1.2 million tons).

Kommersant’s sources note that increasing supplies in both directions is in question due to insufficient production volumes in Kazakhstan. “This issue is currently being studied, and it should be noted that the supply of Kazakh oil to export destinations will also depend on the commercial attractiveness of the route and the agreements of economic entities,” explained the Ministry of Energy of Kazakhstan.

Production in Kazakhstan for 2024 is planned at last year’s level of 90 million tons. The lack of production growth is primarily due to the fact that the project to expand production at one of the country’s largest fields – Tengiz, which was supposed to produce an additional 5-7 million tons, has been postponed to the first half of 2025. Moreover, Kazakhstan took assumes obligations to reduce oil production by 82 thousand barrels per day in the first two quarters of 2024 (to 1.47 million barrels per day) as part of the OPEC+ deal.

Elena Zotova from IRTEK reminds that the main channel for the export of Kazakh oil (80%) still remains the Caspian Pipeline Consortium (CPC) and the port of Novorossiysk. “The supply volumes in other areas are incomparable,” she says.

According to the analyst, now Kazakhstan does not have enough raw materials even to ensure current agreements. Ms. Zotova recalls that out of the promised 1.2 million tons of oil, Germany received less than 1 million tons from Kazakhstan last year under Friendship.

In her opinion, a potential increase in supplies through the Baku-Tbilisi-Ceyhan pipeline is possible, but one should not expect it in the near future.

Olzhas Baidildinov, a member of the public council of the Ministry of Energy of Kazakhstan, agrees with her. He notes that Astana’s intention to increase supplies bypassing Russia is politicized, while the CPC remains the fastest, most convenient and profitable route for oil shipments for Kazakhstan. So, he is sure, it is through Novorossiysk that additional volumes of oil will flow after increasing production at Tengiz. Mr. Baidildinov associates Baku’s intention to purchase raw materials from Kazakhstan, despite its lower quality compared to Azerbaijani oil, with the long-term decline in its own oil production in Azerbaijan.

Olga Mordyushenko