Kazakhstan is considering different options of re-routing its oil from storm-damaged berths of the Caspian Pipeline Consortium (CPC) in the Russian part of the Black Sea.
A storm in the Russian part of the Black Sea damaged the loading equipment of CPC, one of the world’s largest oil pipelines that transports oil from Kazakhstan to world markets, its operator said.
The damage can cut oil exports from Russia and Kazakhstan through the CPC by 1 million barrels per day (bpd), or 1 percent of the world’s oil production.
“The Ministry of Energy of Kazakhstan has alternatives. Partially – transfer of part of the volumes to the port of Aktau. There is also an oil pipeline that runs through Samara, and there is still a small volume that can be transferred in the direction of China,” Bolat Akchulakov, Kazakhstan’s energy minister, said.
He said that there would be reductions in production, but this could be considered as “technologically acceptable reductions.”
“I do not think that the shutdown of the CPC will be a year or a few months. Probably, it will be much less: three weeks or a month, Akchulakov said and added that a repair of the CPC infrastructure in the port of Novorossiisk might take a month and a half and it would not be critical for Kazakhstan.
The CPC pipeline operator initially stated that one of the three mooring points had been damaged by the storm and would take at least three weeks to repair while waiting for the ship. His representative also expressed hope that exports would not be affected, as the other two berths would continue to operate as usual.
Forbes experts believe that “as a result of the consequences of the accident at the CPC, Kazakhstan’s gross domestic product (GDP) growth in 2022 may be short by 0.9 to 1.6 percentage points.
“We will see a significant reduction in Kazakhstan’s nominal GDP per capita in U.S. dollars this year,” independent experts said.
The CPC pipeline has been attracting a lot of attention since Russia’s invasion of Ukraine, which restricted Russian exports and sent oil prices skyrocketing. The United States has imposed sanctions on Russian oil, but the country’s authorities have said that flows from Kazakhstan through Russia must continue uninterrupted.
This pipeline transports about 1.2 million bpd, which is 1.2 percent of global demand. Any major disruption to its operations would put additional strain on the global oil market, which is experiencing one of its worst supply crises since the Arab oil embargo in the 1970s.
Most of the oil in the pipeline is owned by Russia, Kazakhstan and international oil companies such as Chevron. It exports oil from the Russian Black Sea port of Novorossiisk.
One of the options to re-route oil from Kazakhstan might be Baku-Tbilisi-Ceyhan (BTC) pipeline running from Azerbaijan via Georgia to Turkey.
However, an informed source in Azeri state energy firm SOCAR said that it was technically impossible to accept significant volumes from Kazakhstan for transit via the BTC, and there were no such requests yet.
About 110,000 barrels of transit oil from the Russian Federation, Kazakhstan (the Buzachi field) and Turkmenistan go through the BTC per day. Technically, the system is ready to accept another 10,000-20,000 bpd of transit oil right now.
“For volumes above this, stage-by-stage work is needed to increase the capacity of the bridge, which connects tanker oil coming to Baku with the BTC. This is an interest for Kazakhstan for the future, not urgently,” an informed source told the Tribune.
Kazakhstan has a certain opportunity for the transit of some volumes of oil by rail to the Black Sea ports of Georgia, but these are also only small volumes.
Kazakh state oil company KazTransOil owns the oil terminal in Batumi, on Georgia’s Black Sea coast, which provides services for the transhipment of oil and oil products from Kazakhstan, Azerbaijan, Turkmenistan, Georgia and other countries.
The Batumi oil terminal has the capacity to store about half a million tonnes of oil and oil products, transship about 22 types of oil and oil products, although shipments were very low in recent years.
The world’s largest trading houses, such as Vitol and Trafigura, said they estimate the current disruption in Russian oil supplies at 2-3 million bpd. The world is unlikely to be able to cope with interruptions exceeding 2 million bpd, they said, as this will lead to further price hikes and an economic downturn.
Kazakhstan plans to produce 87.5 million tonnes of oil this year, up from 85.7 million tonnes in 2021 and sees oil price at $80 per barrel as a “comfortable” level in order to fulfil the state budget obligations.
Last year, the country drafted a plan to increase oil production to 104.2 million tonnes by 2030 through a number of projects. Among them is a future expansion project at the Tengiz field, thanks to which oil production will increase by 12 million tonnes per year from 2024.