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Kazakhstan is dealing with financial disaster because the warfare in Ukraine threatens crude oil exports, which alone account for round 14 p.c of GDP and 57 p.c of exports.
The majority of those oil exports go by a pipeline from Kazakhstan’s western oil fields by southern Russia to Russia’s Black Sea oil terminal at Novorossiysk. The pipeline, owned by the Caspian Pipeline Consortium (CPC), can deal with round 60 million metric tons a 12 months.
(Transneft)
At simply 200 kilometers from the Ukrainian port of Mariupol, the place among the fiercest preventing is underway, Novorossiysk is shut sufficient for oil tankers to incur a “warfare threat insurance coverage premium,” which in line with vitality information company S&P World Platts has been excessive sufficient to discourage patrons because the Russian invasion of Ukraine started final month.
Platts reported that shippers have been cancelling scheduled bookings to gather tanker a great deal of crude from Novorossiysk.
One of many essential locations for crude exported from the terminal is the Ukrainian port of Odessa the place it’s fed right into a pipeline community to Europe. With Odessa anticipated to come back beneath Russian bombardment inside days, that route is successfully closed.
Manufacturing at Kazakhstan’s large Chevron-operated Tengiz oil discipline and oil movement by the CPC pipeline is continuous as regular, though because of the “warfare threat” the value of Kazakh crude has fallen, regardless of international oil costs hovering to their highest since 2008.
Sadly for Kazakhstan, the danger will not be confined to the bodily hazard posed by the battle.
Round 10 p.c of the crude oil carried by the CPC pipeline comes from oil fields within the Russian sector of the Caspian, which is mixed with the Kazakh crude. With the U.S. and EU discussing a ban on Russian oil imports, patrons are cautious of being left with a tanker filled with crude they’d be unable to ship.
The pipeline’s possession too might pose issues. The Russian part is operated by CPC-R – an organization headquartered in Moscow – whereas the pipeline itself is owned by a consortium by which Russian state agency Transneft holds 24 p.c and subsidiaries of sanctioned Russian oil giants Lukoil and Rosneft collectively maintain one other 20 p.c. At the moment it’s unclear whether or not it will topic the pipeline to direct sanctions.
Movement of Kazakh crude to Novorossiysk could also be persevering with for now, however storage tanks on the terminal have the capability to carry solely about eight days of movement at full capability. As soon as full, movement should halt which in flip would drive a lower in oil manufacturing at Kazakh fields.
Kazakhstan does have various export routes, however none might make up for the losses incurred if the CPC shuts down.
As much as 1 / 4 of Kazakh crude is exported through different Russia pipelines together with the 4,000-kilometer Druzhba community that provides refineries throughout jap Europe and as far west as Germany, though that route additionally faces closure if the European Union opts to ban oil imports from Russia.
Kazakhstan additionally has an jap export route, a pipeline to China able to carrying 20 metric tons per 12 months, or about one-third the CPC’s capability.
That line too carries crude oil from Russian fields which if blocked would depart extra capability for Kazakh exports.
Another choice for Kazakh oil producers could possibly be the Baku-Tbilisi-Ceyhan pipeline from Azerbaijan by Georgia to Turkey’s Mediterranean, which already carries some Kazakh crude.
(Wikimapia)
The route, which has a most capability 50-million tons per 12 months and includes transporting the oil throughout the Caspian by tanker to Baku, is logistically extra complicated and therefore costlier to make the most of than the CPC pipeline.
The extra so since January 2021 when Ankara hiked its transit charge from $0.55 per barrel to between $1.50-$2.00 per barrel. The explanation for the value hike is unclear however the quantity of crude transited by the road final 12 months was down round 4 p.c in comparison with 2020 – regardless of elevated demand for oil merchandise because the COVID-19 pandemic eased – and down by 22 p.c on 2018.
Information from Turkey’s state pipeline operator Botas, which operates BTC, reveals that movement by the road final 12 months was solely 55 p.c of capability, leaving 22.5 million tons of capability unused – ample for a sizeable chunk of Kazakh exports at the moment going to Novorossiysk.
Azerbaijan’s state oil firm SOCAR, which is a serious shareholder in BTC and which manages the present transit of Kazakh crude, stated on March 4 that “at the moment” no further Kazakh volumes have been being exported.
Managing the switch of exports to from one pipeline to a different is more likely to be fraught with authorized, business, and logistic technicalities; a major enhance in Kazakh exports to Ceyhan will not be achieved in a single day.
One additional complication exists.
In response to BP, one other main shareholder in BTC, the Kazakh oil at the moment exported by the road is mixed by SOCAR with different crudes from Turkmenistan and Russia.
Neither SOCAR nor BP replied to requests for additional remark.
To this point, Azerbaijan, Georgia, and Turkey, by which the pipeline passes, have all said their opposition to imposing any sanctions of their very own on Moscow.
By Eurasianet.org
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