Kazakhstan is expected to start selling some of its crude oil output through Azerbaijan’s largest oil pipeline from September, as the Central Asian country looks for alternatives to exports through Russia after the latter has threatened to shut down its pipelines to Kazakh crude, three sources with knowledge of the matter told Reuters.
Russia, Kazakhstan and Azerbaijan were for decades federated republics of the Soviet Union.
Kazakhstan’s oil accounts for more than 1% of global production, at about 1.4 million barrels per day.
For 20 years, Kazakh oil has been transported mainly through the CPC pipeline to the Russian port of Novorossiysk on the Black Sea, through which it “goes out” to the world market.
In July, a Russian court threatened to shut down the CPC, leading the Kazakh government to contract with other structures as a precautionary measure.
None of the alternatives is as practical as using the CPC, which threatens to further disrupt international markets.
Shortly after Russia’s invasion of Ukraine in February, crude oil hit 14-year highs, averaging more than $100 a barrel even in July.
A source with direct knowledge of the matter said Kazakhstan’s state-owned oil company Kazmunaigaz (KMG) has already opened talks with the trading arm of Azeri state-owned SOCAR to allow the latter to allow 1.5 million tonnes of Kazakh crude per year to be sold. transported through Azerbaijan to the Turkish Mediterranean port of Ceyhan.
The amount corresponds to a little more than 30,000 barrels per day, a negligible amount compared to the 1.3 – 1.4 million barrels traded through the CPC.
The Kazakhstan-Azerbaijan contract is expected to be signed at the end of August and flows will start about a month later.
Another 3.5 million tonnes a year of Kazakh oil could start flowing by 2023 through the Azeri pipeline to the Georgian port of Supsa, according to two sources.
Combined, these flows account for 8% of flows through CPC. Both KMG and SOCAR declined to comment on the matter.
Through Azerbaijan, Kazakhstan hopes not to have to use Russian territory.
Source: Capital
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