Exclusive: Kazakhstan to start oil sales via Azeri pipeline to bypass Russia

An inside view exhibits a brand new pumping station of the Caspian Pipeline Consortium (CPC) close to the town of Atyrau, Kazakhstan October 12, 2017. REUTERS/Mariya Gordeyeva/File Photograph

MOSCOW/LONDON, Aug 12 (Reuters) – Kazakhstan is anticipated to promote a few of its crude oil by way of Azerbaijan’s greatest oil pipeline from September, because the nation seeks options to a route Russia threatened to close, three sources conversant in the matter mentioned.

Kazakh oil exports account for greater than 1% of world provides, or roughly 1.4 million barrels per day (bpd).

For 20 years, they’ve been shipped by way of the CPC pipeline to Russia’s Black Sea port of Novorossiisk, which gives entry to the worldwide market.

In July a Russian court docket threatened to close the CPC, prompting the Kazakh authorities and main overseas producers to arrange contracts for different shops as a precaution.

Not one of the options are as sensible because the CPC pipeline, elevating the chance of additional volatility on vitality markets.

Shortly after Russia invaded Ukraine in February, worldwide crude costs hit 14-year-highs and costs have stayed excessive, sustaining a mean above $100 a barrel in July.

A supply with direct data of the matter mentioned Kazakhstan’s state oil agency Kazmunaigaz (KMG) was in superior discussions with the buying and selling arm of Azerbaijan’s state agency SOCAR to permit 1.5 million tonnes per yr of Kazakh crude to be bought by way of the Azeri pipeline that delivers oil to Turkey’s Mediterranean port of Ceyhan.

At simply over 30,000 bpd, the amount is a trickle in comparison with the standard 1.3-1.4 million bpd that flows by way of the CPC pipeline.

The ultimate contract is because of be signed on the finish of August with flows by way of the Baku-Tbilisi-Ceyhan (BTC) pipeline beginning up a month later, the supply mentioned.

One other 3.5 million tonnes per yr of Kazakh crude may begin flowing in 2023 by way of one other Azeri pipeline to Georgia’s Black Sea port of Supsa, two sources mentioned.

Mixed with BTC flows, the amount would equate to simply over 100,000 bpd, or 8% of the CPC flows. KMG declined to remark and SOCAR declined to touch upon the precise deal.

Counting on Azerbaijan would enable Kazakhstan to side-step Russian territory. Final month, BP Azerbaijan mentioned it will redirect flows away from the Baku-Supsa pipeline to the bigger BTC pipe. learn extra

Nevertheless, the brand new BTC route means Kazakhstan should depend on a fleet of small tankers to take its oil throughout the Caspian Sea to Baku from its port at Aktau that has restricted spare capcity, the sources mentioned.

OTHER ROUTES

Tengizchevroil (TCO), a three way partnership led by oil main Chevron, has its personal advertising and marketing arm and is individually negotiating its personal routes by pipeline and rail, two of the sources mentioned.

The BTC pipeline might be an choice for TCO too, however a supply mentioned if agreed, it may take as much as six months for flows to start out. TCO declined to remark.

High quality is one other issue impeding a fast settlement. Kazakhstan’s important grade CPC Mix is a light-weight, bitter crude bought at a major low cost to Azerbaijan’s flagship BTC grade that’s an easier-to-refine medium, candy grade.

TCO already started re-routing a small quantity of oil by rail to Georgia’s port of Batumi in April when storm harm made a part of the CPC terminal unusable.

Two of the sources mentioned TCO was reserving extra rail volumes and so they may improve in September or October.

Kazakhstan individually exports as much as 1 million tonnes, or 250,000 bpd, of Urals through Russia’s pipeline system to the Black Sea and to Baltic sea ports.

Reporting by Reuters reporters and Julia Payne in London; further reporting by Nailia Bagirova in Baku; modifying by Barbara Lewis

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