Rosneft will not stop in Kazakhstan – Kommersant

Rosneft has renewed an agreement with Kazakhstan’s Kaztransoil on the supply of 10 million tons of oil per year to China through Kazakhstan for ten years. Rosneft signed a long-term contract for the supply of oil with the Chinese CNPC back in 2013, and in 2022 extended it until 2034. Under the conditions of sanctions, it is beneficial for a Russian oil company to increase pumping along routes that are not subject to restrictions. But experts doubt the possibility of significantly increasing transit to China through Kazakhstan in the future.

Rosneft extended for another ten years, an agreement with the Kazakh pipeline operator Kaztransoil on the transit of Russian oil to China through Kazakhstan. The new contract will be valid until 2034 and involves the transportation of 10 million tons of oil annually through the Atasu-Alashankou pipeline (capacity – 20 million tons of oil per year) to the Chinese CNPC. Originally “Rosneft” concluded Kazakhstan contract for five years in 2013 with a supply volume of 7 million tons per year, but in 2017 it was extended until 2024, and the volume increased to 10 million tons per year. In February 2022, Rosneft and CNPC extended the contract for another ten years. According to Kaztransoil, in four months of 2023, the volume of transit supplies to China amounted to 3.2 million tons.

To supply oil to China through Kazakhstan, Rosneft uses a swap scheme: for example, a Russian oil company supplies oil to the Pavlodar refinery, and Kazakhstan in return pumps its own raw materials to China via the Atasu-Alashankou oil pipeline.

As a result of EU sanctions against the Russian oil industry, Russian companies had to redirect most of the pipeline oil supplies to Europe by sea to other regions, mainly to Asia.

However, Western restrictions and higher freight rates created a discount for Russian oil shipped from the ports of the European part of the Russian Federation. Meanwhile, there is practically no discount for the oil that Russia initially supplied to China and other Asian markets. Therefore, it would be beneficial for Russian companies to increase supplies to China through Kazakhstan. In March last year, Deputy Prime Minister Alexander Novak mentioned the creation of a working group by the Russian Federation and Kazakhstan to increase transit supplies. “Our pipeline allows us to transport up to 20 million tons of oil to China. In theory, seventy percent could be increased,” said the head of Kazmunaigas, Magzum Mirzagaliev, in June 2022.

In December 2022, Kaztransoil commissioned oil pumping stations NPS-8 and NPS-10 on the Atasu-Alashankou oil pipeline, which increased its annual capacity from 12 million to 20 million tons per year, Sergey Kondratiev from the Institute of Energy and Finance notes. In 2021, oil pipeline transportation amounted to 10.9 million tons, in 2022 – 10.3 million tons; the main load is provided by Rosneft, which pumped 9 million tons in 2022 (10 million tons in 2021). Additional loading of the Atasu-Alashankou oil pipeline was discussed by the authorities of Kazakhstan in 2022 as part of a strategy to diversify oil supplies, the expert recalls. In his opinion, there is a possibility of increasing transit over the contracted 10 million tons, but the expert doubts that Kaztransoil will conclude a long-term agreement: rather, the company will put up free capacities for auction, which will allow maintaining flexibility and, if necessary, redirecting part of Kazakhstani export flows to the East.

Dmitry Kozlov