Western Oil Giants Worried Over Russia’s Possible Suspension of CPC

Western energy giants will be forced to cut production and lose billions of dollars if Russia suspends the Caspian Pipeline Consortium (CPC), which carries almost all of Kazakhstan’s oil to world markets. A possible closure would mean more than 1% of global oil supplies to be lost, exacerbating the most severe energy crunch since the Arab oil embargo of the 1970s.

The CPC runs through Russian territory and exports Kazakh oil through Russia’s Black Sea port of Novorossiisk. It is owned by a consortium of Western, Asian, Russian and Kazakh companies.

Last Wednesday, a court in Novorossiisk ordered CPC to suspend operations for 30 days, citing concern about oil spill management. Another Russian court overturned the ruling on Monday and instead fined it 200,000 roubles ($3,300).

The companies are still worried over major disruptions, as Russia has said all stoppages are driven by technical issues.

Storm damage in March has already interrupted flows through the 1.3 million barrels per day (bpd) pipeline.

Major oil companies, including Chevron, Exxon Mobil, Shell and Eni have stakes in the CPC. Western companies also hold stakes in Kazakh oilfields.

Western oil companies operating in Kazakhstan expect a prolonged CPC pipeline suspension.

A suspension would result in a decline of 1 million bpd because Kazakhstan has limited alternative export routes.

Russia’s invasion of Ukraine has prompted many Western companies to exit Russia, and oil giants were among the first to leave. Western sanctions have disrupted Russian exports and pushed up energy prices.

In response, Russia moved towards seizing oil and gas projects Sakhalin 1 and 2, where Shell and Exxon have stakes.

Shortly after Russia’s invasion of Ukraine, international oil prices spiked to their highest levels since the records of 2008. They have since eased to just above $100 a barrel as the anticipated economic weakness is expected to lower demand, although selling has been limited by concerns of tight supplies that would be exacerbated by a cut in CPC output.

Analysts say oil prices could soar to an all time high of $190 per barrel if a combined 3 million bpd from Russia and Kazakhstan was hit by sanctions.

Kazakhstan produces some 1.6 million bpd of oil, and exports about 80% of that volume, mostly through the CPC.

Last week, Kazakh President Tokayev told his government to diversify oil supply routes.

Oil majors have studied the viability of alternative routes in recent months, including to China and trans-Caspian shipments to Azerbaijan and Georgia. All of those options are challenging.

The pipeline to China can take oil from east and central Kazakhstan, but most of the large fields are in the West.

On the Caspian Sea, exporters face tanker shortages and have little capacity to take more oil.

Chevron has the biggest stake among Western companies in Kazakh production at around 380,000 bpd, or more than 12%, of its total output.

If Chevron’s investments in Kazakhstan were impaired or lost, that could lead to a ratings downgrade. A long-term closure would also threaten Chevron’s future growth plans. The U.S. major planned to boost output by 40% at Kazakhstan’s largest field Tengiz to around 1 million bpd.

Exxon is the second largest foreign producer in Kazakhstan with output of 213,000 bpd of oil and 234 million cubic feet of gas. It is followed by Eni with some 145,000 barrels of oil equivalent per day, Shell with around 100,000 boed and TotalEnergies with some 80,000 boed in 2021.

Need to access the insight?

Start your 7-day free trial now

Need to access the insight?

Start your 7-day free trial now

Need to access the insight?

Start your 7-day free trial now

Do you need to access special insights on this matter?

Start your 7-day free trial  and become a member today

Subscribe to Top Insights Today

Subscribe to Executive Newsletter Top Insights Today

The Executive Newsletter -Top Insights Today- puts global business events in perspective through special insights

Join the ranks of global executives and subscribe to Top Insights Today

Top Insights Today covers insights on energy, clean-tech, oil&gas, mining, rare earths, defense, aviation, infrastructure, manufacturing, electrical vehicles, big-tech, finance and politics of business

By clicking subscribe you agree to our privacy and cookie policy and terms and conditions of use.

Read more insights

Decarbonization, Critical Minerals, LNG Focus of Scholz’s Canada Trip

Canada and Germany have been looking to build closer ties after Russia’s invasion of Ukraine, with Canada looking to increase energy and mineral exports to Germany in line with both countries’ targets to phase out fossil fuels. German Chancellor Scholz and Canadian Prime Minister Trudeau met on Monday as part of Scholz’s three day trip to Canada, with a delegation of German company executives.

French Delegation Prepare Taiwan Visit Despite Opposition from China

French Senate’s Taiwan Friendship Group, headed by former defense minister Alain Richard, prepares to visit Taiwan this week despite opposition from China. The visit comes at a time when tensions between China and Taiwan has started to rise. China flew almost 150 warplanes over Taiwan’s air zone for four days beginning on October 1, China’s National Day.  

Japan is Undertaking Its Biggest Military Buildup Since WWII

Japan set to undertake its biggest military buildup since World War II between this year’s Communist Party Congress and the next one in 2027. The move aims to deter Beijing from a war in East Asia, as Japan designates China as its number one adversary in its 2019 defense white paper. Tokyo has been concerned over Beijing’s flouting of international norms, pressure on Taiwan and rapid military modernization and recognizes them for posing a national security threat. Worries have grown since Russia invaded Ukraine, which weakened Japanese public opposition to rearming.

Stay informed

error: This content is protected !!