Reuters: Kazakhstan will transport oil through Azerbaijan, bypassing Russia

From September this year, Kazakhstan intends to sell some of its crude oil through Azerbaijan’s largest oil pipeline Baku-Tbilisi-Ceyhan (BTC), as it seeks alternatives to the Caspian Pipeline Consortium (CPC), which Russia has threatened to shut down. Reports about it Reuters with reference to sources.

The interlocutor of the agency said that the Kazakh state oil company KazMunayGas is conducting preliminary negotiations with the trade division of the Azerbaijani state company SOCAR. She wants to get permission to sell 1.5 million tons of oil per year through the Azerbaijani pipeline, which delivers fuel to the Turkish port of Ceyhan.

A volume of just over 30,000 b/d is negligible compared to the usual 1.3-1.4 million b/d that passes through the CPC pipeline, Reuters notes.

The final contract is to be signed at the end of August, and flows through the BTC pipeline will begin in a month, the source said.

Another 3.5 million tons of Kazakh oil per year could start flowing in 2023 via another Azerbaijani pipeline to the Georgian port of Supsa, two other sources said.

Combined with BTC flows, the total would be just over 100,000 bpd, or 8% of CPC flows. KazMunayGas declined to comment to Reuters, and SOCAR declined to discuss the specific deal.

Thanks to the route through Azerbaijan, Kazakhstan will be able to bypass the territory of Russia. Energy company BP Azerbaijan said last month that it would redirect flows from the Baku-Supsa pipeline to the larger BTC pipeline. However, the new BTC route means that Kazakhstan will have to use a fleet of small tankers to transport oil across the Caspian Sea to Baku from the port of Aktau. The latter has limited capacity, agency sources said.

The export of Kazakh oil makes up more than 1% of world supplies, or about 1.4 million barrels per day. For 20 years, it has been supplied via the CPC pipeline to the Russian port of Novorossiysk, which provides access to the world market. In July, a Russian court threatened to shut down CPC due to environmental violations. After that, the government of Kazakhstan and major foreign oil producers entered into contracts with other companies.

Daria Erozbek