Kazakhstan to Divert Some CPC Oil to Azerbaijan Pipeline
- August 12, 2022
- Posted by: Quatro Strategies
- Category: Energy
Kazakhstan is set to divert some of its oil exports to Azerbaijan’s BTC Pipeline from the current Caspian Pipeline Consortium (CPC) Route. The Central Asian nation has been seeking alternatives to the Russian route, which was threatened to shut. Kazakhstan exports 1.4 million barrels per day (bpd) of oil, which accounts for 1% of world supplies. For the last 20 years, the CPC pipeline has been the primary export route for Kazakh crude, connecting it to Russia’s Novorossiisk port on the Black Sea coast, which provides access to global markets.
In July a Russian court threatened to shut down the CPC pipeline, forcing Kazakhstan and major foreign producers to set up contracts for other outlets as a precaution. However, none of the other alternatives are as practical as the CPC, which raises volatility concerns on energy markets.
Global crude oil prices have hit 14-year highs shortly after Russia invaded Ukraine in February. They had kept at an average above $100 a barrel in July.
Kazakhstan’s state owned oil firm Kazmunaigaz (KMG) was in advanced talks with Azerbaijan’s state firm SOCAR to allow 1.5 million tonnes per year of Kazakh crude to be sold through the Azeri pipeline.
But at just over 30,000 bpd, the volume is a trickle compared to the usual 1.3-1.4 million bpd that flows through the CPC pipeline.
The final contract is expected to be signed at the end of August, and flows through the BTC pipeline would start a month later.
In addition, another 3.5 million tonnes per year of Kazakh crude could start flowing in 2023 through another Azeri pipeline to Georgia’s Black Sea port of Supsa.
Combined with BTC flows, the volume would total just over 100,000 bpd, or 8% of the CPC flows.
The new BTC route would mean Kazakhstan to rely on a fleet of small tankers to take its oil across the Caspian Sea to Baku from its port at Aktau that has limited spare capacity.
Meanwhile, Tengizchevroil (TCO), a joint venture led by oil major Chevron, also discusses its own alternative routes by pipeline and rail. BTC could also be an option for TCO, but if agreed, it would take up to six months for flows to start.
TCO already began re-routing a small volume by rail to Georgia’s port of Batumi in April when storm damage made part of the CPC terminal unusable.
Two of the sources said TCO was booking more rail volumes and they could increase in September or October.
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