Oil cracked – Newspaper Kommersant No. 153 (7354) of 08/23/2022
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The main Kazakh oil export route, the Caspian Pipeline Consortium (CPC) oil pipeline, is facing shipment restrictions for the fourth time this year due to technical problems at the Novorossiysk terminal. This time, the work of two of the three remote mooring devices was stopped due to the detected damage. According to Kommersant, taking into account the necessary procedures for selecting a contractor and the imminent start of the storm season, restoration work may be delayed until spring. In this case, deliveries of Kazakh oil to the world market through the CPC may fall by 15 million tons.
Russian operator CPC August 22 informed on the decommissioning of two remote mooring units (TLU) at the terminal in Novorossiysk. During scheduled maintenance, divers found cracks in the attachment points of the underwater hoses to the buoyancy tanks (they maintain the underwater hoses through which oil is shipped in the right position). Also, on the VPU-2 tank, a displacement of the swivel joint was recorded at the site of the crack formation.
The CPC explained that they turned to the manufacturer of the TLU – Imodco (part of the Dutch SBM Offshore) and the ABS classification society for consultations and the organizations recommended suspending the operation of the equipment until the buoyancy tanks are replaced. The ABS classification society suggested that the damage could be caused by exceptionally difficult hydrometeorological conditions during the winter period of 2021/22, the CTC said. The company emphasizes that there is no threat to the environment.
CPC is the main export route for Kazakhstani oil, the pumping plan for this year is 67 million tons. The main part of the volumes is supplied by the operator of the giant Tengiz field, Tengizchevroil, where the American Chevron owns the largest share. The shareholders of CPC itself are Russia (31%), Kazakhstan (20.75%), Chevron (15%), LUKARCO BV (12.5%), Mobil Caspian Pipeline Company and Rosneft-Shell Caspian Ventures (7.5% each) , BG Overseas Holding and Eni International (2% each), as well as Oryx Caspian Pipeline LLC (1.75%).
This is the fourth incident in Novorossiysk since the beginning of the year, which led to a decrease in shipments through the CPC. Storm in March damaged shipping hoses, in May near an underwater oil pipeline was conducted clearance of shells from the Second World War, and in July to stop the work of the consortium for 30 days demanded Primorsky District Court of Novorossiysk due to environmental violations.
Now deliveries through one TLU will allow fulfilling the orders of consignors in reduced volumes, the CPC said, refusing to comment in more detail. Also, the company does not comment on the timing of repairs. They explained that the replacement of tanks will be carried out from those in reserve, and to complete this operation, a pre-qualification selection of organizations is needed.
A Kommersant source familiar with the situation says that, given the political situation, repairs will most likely be delayed until spring: even if the company manages to select a contractor and sign a contract with him by October, the storm season will begin, during which it will be impossible to carry out work .
As a result, according to Kommersant’s interlocutor, deliveries through the CPC may decrease by at least 50%, to 28-30 million tons on an annualized basis. Such calculations are confirmed by Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation. He notes that in normal mode, as a rule, two TLUs operate, and the third one is connected when necessary. Therefore, taking into account the plans for pumping up to 67 million tons for 2022, the shutdown of two TLUs threatens to decrease to about 30 million tons on an annualized basis. Therefore, if the repair is delayed for six months, the shipment will amount to 15 million tons by March.
According to Igor Yushkov, foreign companies that deliver oil to CPC as part of a consortium, primarily Chevron, will suffer the greatest losses. Russian companies supplying oil to the CPC from the Caspian fields will have to look for alternative supply routes. CPC oil is now trading at a premium to Urals and, moreover, it is not subject to sanctions imposed by the EU.
Kazakhstan can minimize losses due to reduced CPC throughput by redirecting oil to the Russian system and exporting it through the Baltic ports.
Free capacities for redirecting Kazakh oil to the Transneft system amount to about 20 million tons per year. An alternative route involves the delivery of Kazakh oil by tankers through the Caspian Sea to Azerbaijan, and then its export via the Baku-Tbilisi-Ceyhan oil pipeline. However, free capacities in this direction do not exceed 5 million tons per year. At the same time, any alternative routes will be more expensive than pumping through the CPC. Igor Yushkov believes that if the repair can be completed during September, then there will be no point in looking for new export routes for Kazakhstan.
In the summer, Kazakh President Kassym-Jomart Tokayev instructed the government to explore alternative oil export routes that would bypass Russia. Nur-Sultan later said the measure was not directed against Moscow, and on August 12, Kazakh Energy Minister Bolat Akchulakov said that KazMunayGas had no plans to sign a contract with Azerbaijan to transport oil. Nevertheless, on August 16, the head of Kazmunaigas, Magzum Mirzagaliyev, arrived in Baku, where he met with the head of the Azerbaijani state company Socar, Rovshan Najaf, and discussed “interaction between companies in the development of trans-Caspian infrastructure.”
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