Kazakhstan plans to expand export oil pipeline to China

Kazakhstan’s Kazmunaigas (KMG) and China’s CNPC have agreed to expand the Kazakhstan-China oil pipeline at an estimated cost of around $200 million, KMG Chairman Magzum Mirzagaliyev said on the sidelines of the China-Central Asia summit on May 18. On the same day, the company’s press service reported that KMG and CNPC had signed a corresponding agreement.

“The cost will be about $200 million for expansion. We would like to start the relevant work as early as next year in order to carry out the necessary work over the next two to three years,” Mirzagaliev said (the video of the response was posted by Orda.kz).

The head of KMG explained that it would be possible to increase the export of Kazakh oil to China by increasing the capacity of the Atyrau-Kenkiyak and Kenkiyak-Kumkol oil pipelines. Now their throughput, according to him, is only 6 million tons per year. At the same time, the capacity of the Atasu-Alashankou pipeline is 20 million tons, which Kazakhstan could theoretically fill with its oil, Mirzagaliyev noted. Now 10 million tons of Russian oil and only 1-2 million tons of Kazakh oil are already supplied to China through this section, the head of KMG added. “And in this regard, we agreed to expand,” Mirzagaliyev stressed.

Back in the summer of 2022, President of Kazakhstan Kassym-Jomart Tokayev instructed the government of the republic, together with the national fund Samruk-Kazyna, to take measures to increase the capacity of the Atyrau-Kenkiyak and Kenkiyak-Kumkol oil pipelines (Vedomosti wrote about this on July 7, 2022).

The Kazakhstan-China Pipeline is a joint venture between Kaztransoil (50%) and CNPC’s subsidiary CNODC (50%). The joint venture owns the main oil pipelines Atasu – Alashankou and Kenkiyak – Kumkol. The Atasu-Alashankou oil pipeline transports raw materials to China from the fields of the West Kazakhstan region, Aktobe and Kumkol fields, as well as oil from Russia. In 2021, oil pumping through the Atasu – Alashankou section amounted to 10.9 million tons, and through Kenkiyak – Kumkol – 6.7 million tons.

Through the Kazakh oil pipeline to China, 10 million tons of Rosneft’s raw materials are pumped a year. On May 15, the oil pipeline operator Kaztransoil announced that the companies had extended the contract for pumping Russian oil until 2034 in the same volume and at the same rate. According to Kaztransoil, in January-April 2023, the volume of deliveries to China amounted to 3.2 million tons.

The volume of oil and gas condensate production in Kazakhstan in 2022 decreased by 2% compared to 2021 and amounted to 84.2 million tons, Bolat Akchulakov, then Minister of Energy of the country, reported in early January. According to him, in 2023 the Ministry of Energy of the country expects an increase in oil production to 90.5 million tons, of which 71 million tons are planned to be exported.

The existing pipeline infrastructure from Kazakhstan to China can be modernized and expanded, Andrey Maslov, an analyst at FG Finam, suggests. It does not exclude the construction of branches from the oil pipeline, but there is only one main route of the pipeline – directly through the whole of Kazakhstan. “Therefore, most likely, most of the new pipeline will duplicate the old sections, with possible minor changes and additional branches,” Maslov said.

The analyst believes that Kazakhstan’s decision to increase oil supplies to China is logical from a political and economic point of view. Now most of Kazakhstan’s oil is exported through the oil pipeline system of the Caspian Pipeline Consortium (CPC), through which raw materials are delivered to the sea terminal near Novorossiysk. According to Maslov, since the pipeline goes to Russian territory, after the start of the NWO in Ukraine, exports along this route may be difficult. Against this background, the analyst recalls, Kazakhstan has agreed with Azerbaijan on oil supplies via the Baku-Tbilisi-Ceyhan (BTC) pipeline, but its capacity is being used “to the limit”.

CPC is the main export oil pipeline for Kazakhstan. Kazmunaigas owns 19% in CPC, another 24% belongs to Transneft, other major shareholders are the American Chevron (15%), andLukoil» (12.5%). In 2022, pumping through CPC amounted to 58.7 million tons, the company reported in mid-January. The volume of pumping through the CPC last year decreased by 3.3% compared to 2021. About 52.2 million tons entered the oil pipeline from the territory of Kazakhstan

Pumping through the BTC pipeline in the first quarter of 2023 increased by 7.9% year-on-year to 609,000 barrels per day, said Kirill Rodionov, an expert at the Institute for the Development of Fuel and Energy Complex Technologies. This volume includes deliveries from Kazakhstan, which, in accordance with the agreement between Socar and Kazmunaigas, in 2023 should amount to 1.5 million tons per year, or 30,000 barrels per day.

Demand for additional volumes of Kazakh oil per year in China is quite possible, Maslov believes. The Chinese economy, albeit unevenly, is recovering from the coronavirus pandemic, and the demand for energy resources in the country will only grow, he clarifies.