NUR-SULTAN
Kazakhstan may lose 320 barrels per day (bpd) or 1.3 million tonnes of oil during one-month repair works on the storm-damaged berths of the Caspian Pipeline Consortium (CPC) in the Russian part of the Black Sea, the country’s energy ministry said.
A storm in the Russian part of the Black Sea last week damaged the loading equipment of CPC, one of the world’s largest oil pipelines that transports oil from Kazakhstan to world markets.
“This reduction will be considered part of the compensation plan as part of the engagement with OPEC+ partners,” the ministry said in a statement.
“Taking into account the overhaul at the facilities of the pipeline in June-July, Kazakhstan by the end of June will fully compensate for its obligations to limit production under the OPEC+ agreement.”
As the COVID-19 pandemic disrupted production as well as demand for oil, OPEC+, a group of the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers of which Kazakhstan is a member, cut output by a little more than 7 million bpd to support prices and reduce oversupply. Other former Soviet oil-producing countries, Russia and Azerbaijan, are also OPEC+ members.
In April 2021, members of the group agreed to ease cuts gradually from May. The new deal agreed in September envisaged a further increase by 400,000 bpd “until the parties agree to lift the restrictions”. Kazakhstan, which has been advocating for increased production quotas, welcomed the decision to boost production levels.
OPEC+ decided to continue to increase production by another 400,000 bpd in January 2022 amid news of a possible drop in energy demand due to a new strain of the coronavirus known as Omicron. Experts say that OPEC+ believes that could potentially cause a reduction in demand for energy in the event of strengthening restrictive measures.
Kazakhstan is set to produce 1.605 million bpd in March.
The CPC pipeline damage forced Kazakhstan to consider different options for re-routing its oil.
“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 last week.
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.