Transit of Kazakhstan's fuel and energy products via Baku - an option that Astana always keeps in mind

Baku/04.06.22/ Turan: Minister of Energy of Kazakhstan Bolat Akchulakov attended Baku Energy Week events, on the sidelines of which he gave an interview to ASTNA, the analytical service of Turan Agency.

According to the head of the Kazakh energy agency, Azerbaijan has great potential for transit of Kazakhstan's energy products and is an important "option" that Astana does not lose sight of, but its use by Kazakhstan is currently limited. There are several reasons for this.

The main one is that all the oil currently produced in Kazakhstan (about 86 million tons per year according to 2021 results and expectations for 2022) is distributed, with 67.6 million tons exported in 2021, of which 53 million tons via Russia to Novorossiysk via the Caspian Pipeline Consortium (CPC) system.

"The CPC is the most profitable route for us in terms of margins for Kazakhstani oil and reliability ... There was an idea to expand the CPC's capacity to 80m tonnes of oil per year from the current 60m tonnes per year, which can be done quickly by increasing the number of pumping stations, however, for lack of guaranteed oil volumes, it has not been discussed in detail," Akchulakov said.

Oil for export comes from three major Kazakhstani fields - Tengiz, Kashagan and Karachaganak. 

The Minister said that during an accident at the CPC in late March 2022 related to the mooring devices, the oil production in Kazakhstan was slightly reduced in the spring, "but managed to get by with a loss of only 300,000 tonnes, although it was expected to have to reduce production by 2 million tonnes.

"A scheduled overhaul at the Kashagan field began on June 1, which will last 45 days, and with all the nuances (the CPC accident and scheduled repairs at the field), we expect to produce a total of about 86 million tonnes of oil in the country in 2022," Akchulakov said.

He noted that another major field of Kazakhstan - Tengiz - is completing a project to increase production, which will allow Kazakhstan to produce a total of up to 100 million tons of oil per year from 2024.

In this case, can Baku get a large volume of transit Kazakhstani oil?

The Minister believes that a number of issues must be resolved for this to happen. "In particular, there is the issue of tariffs related to the volumes of transported oil, and the more volume we want to declare (for possible transit through Baku), the less will be the tariff. We are discussing this with the Azerbaijani side," the Minister said in an interview.

Kazakhstan also has a variant to use Batumi port (Kazakh company KazTransOil owns Batumi oil terminal with several million tons of transshipment capacity), to which oil can be delivered either through Russian territory by railway or through Azerbaijan territory (tanker-railroad combination).

If the transit option via Baku is chosen, several issues arise, including the readiness of the receiving facility at Sangachaly (in Absheron) to divert large Kazakh crude into the Baku-Tbilisi-Ceyhan (BTC) pipeline.

"It takes about six months to expand the intake junction at the Sangachal terminal, but these works will become relevant only if Kazakhstan guarantees to provide large volumes of oil", the Minister said.

Much more time and money will be needed to resolve another transit-related issue -  preparation of Kazakhstan's ports, he said.

"For large volumes of oil transhipment, Aktau port needs modernisation, half of its infrastructure is obsolete. The real current capacity of this port (for oil cargo) is just over 5 million  tonnes per year. Its relevance decreased after the CPC came into operation and after the Chinese direction of some Kazakhstani oil exports appeared. But if necessary, we can restore transshipment capacity in Aktau to 10 million tonnes per year again," the Minister said.

He also reminded that within the framework of plans on trans-Caspian oil transportation the port Kuryk was established in due time, in particular, for oil from Kashagan.

"However, when oil production at Kashagan started with some delay, the CPC had already been expanded by that time, and Kuryk's relevance disappeared," Akchulakov reminded.

He also did not exclude that, if necessary, it is possible to revive the idea of expanding the fleet of Kazakh tankers on the Caspian (now there are only three) with deadweight not more than 12,000 tons (with due regard for the shallow depth of the Caspian ports of Kazakhstan) in the presence of surplus volumes of oil.

The Minister also recalled the existence in the past of "an interesting and advantageous scheme of cooperation with Iran - swap operations, when Kazakhstan used to supply certain volumes of oil to Iranian refineries near the Caspian Sea, and the Iranian side sent the same volumes for export in the Persian Gulf.

"We are considering all possible alternatives to deliver Kazakhstani oil to the world market, taking into account the fact that Kazakhstan has no access to the open sea," Akchulakov said in an interview.He also informed about Kazakhstan's interest in providing small volumes of oil for processing at the Baku oil refinery.

"If the Azerbaijani side offers us this, we will consider this issue," the Minister said.

When it comes to the transit of processed products of Kazakh refineries through Azerbaijan, Kazakhstan has experience in exporting liquefied petroleum gas (LPG) along this route.

"Buyers for Kazakhstan LPG are in Eastern Europe and, in particular, Ukraine. But now these markets are closed (due to the geopolitical situation - note by ASTNA). But in general, the transit of LPG through Baku is interesting," the Minister said.

Akchulakov also stressed the importance for Kazakhstan of the extensive experience of Azerbaijani oil geologists.

"There is a project - the Eurasia club, concerning the study of the Caspian zone in Kazakhstan for the search of hydrocarbons. But the well there should be 15,000 meters deep. It is expensive, it takes a long time to drill, so a special club of the Caspian states "Eurasia" was created, in fact, for scientific research through this well. If this idea is implemented, then this well could provide answers to many questions on geology," the Minister added as saying that this issue has been postponed for the time being and is not of a priority nature.—0—