Kazakhstan: CPC pipeline shutdown poses serious economic threat

A consortium working the pipeline that Kazakhstan makes use of to export the majority of its oil has mentioned the route could also be largely unusable for as much as two months due to infrastructure harm brought on by a current storm.

The Caspian Pipeline Consortium, or CPC, mentioned in a March 22 assertion that two of three tanker loading services on the Russian Black Sea port of Novorossiysk, which permit ships to tackle oil at a protected distance from the shore, have been rendered inoperable.

CPC chief govt Nikolai Gorban advised reporters on March 23 that the loading of oil on the Novorossiysk terminal has stopped fully in the interim. Whereas oil may be fed into the 1,500-kilometer pipeline, which begins at Kazakhstan’s big Tengiz discipline on the japanese shores of the Caspian, shipments in March and April will fall fivefold in contrast with the same old quantity, he mentioned.

The consortium has mentioned it can battle to search out spare elements for the broken tanker loading services due to the worldwide sanctions imposed in opposition to Russia in response to its invasion of Ukraine. Russian Deputy Power Minister Pavel Sorokin mentioned oil exports via the CPC pipeline could drop by about 1 million barrels day by day over the 2 months it takes to impact repairs, Russia’s state-run information company TASS reported.

Analysts cited by the Monetary Occasions expressed some skepticism concerning the claims of storm harm, noting that not one of the consortium’s Western companions, which embody the majors Chevron and Exxon, who personal 15 % and seven % stakes, respectively, have been in a position to perform their very own inspections.

“If a storm shuts down infrastructure or if Russia shuts down infrastructure, Russia can determine when it reopens infrastructure,” Kevin Guide, managing director at ClearView Power Companions, a Washington-based analysis group, advised the Monetary Occasions.

This drop in deliveries goes to be notably painful for Kazakhstan. Greater than two-thirds of the nation’s oil exports undergo the CPC pipeline.

In 2021, CPC shipped 60.7 million tons of oil, equal to roughly 510 million barrels, via the Novorossiysk terminal. Of that complete, 53 million tons got here from the Kashagan, Tengiz and Karachaganak fields in western Kazakhstan. One other 7.7 million tons was delivered by Russian corporations.

Kazakhstan’s Power Ministry mentioned on March 23 that it’s “consulting with the CPC on the timing of the resumption of operations on the marine terminal” and that it’s also, within the meantime, contemplating different routes for oil exports.

Consultants word, nonetheless, that there are few viable choices.

Oleg Chervinsky, an power journalist, advised Eurasianet that one risk was to redirect oil flows from the CPC pipeline to the northbound Atyrau-Samara pipeline into Russia. This is able to imply mixing high-quality Tengiz crude with the comparatively impure Russian Urals mix, which at the moment trades at round two-thirds of the worth of the Brent mix that’s mostly quoted on worldwide markets.

Going by sea throughout the closed Caspian and feeding oil into the Baku-Ceyhan pipeline would solely go some technique to addressing the export shortfall, since dealing with capability on the Kazakh port of Aktau is constrained, Chervinsky mentioned.

“Sadly, stopping shipments from the Novorossiysk terminal will result in a decline in oil manufacturing in Kazakhstan, which is able to result in a shortfall in income for exporters and a discount in tax revenues additional down the chain,” he mentioned.