Kazakh oil exporters get relief after Russian court lifts pipeline ban – The Diplomat

The pipeline policy continues to be in the focus of attention of the Kazakh media. When a Russian court ordered the Caspian Pipeline Consortium (CPC) to stop operations, quoting administrative violations, on July 6, Kazakh exporters wondered how they would ship oil to their foreign buyers, since 80 percent of the country’s exports go through the pipeline.

Political and business pressure helped overturn the July 11 court decision as the 30-day suspension was converted into a fine equivalent to just $3,250. The oilmen of Kazakhstan breathed a sigh of relief.

Built in 2001, the CPC is a semi-private international pipeline running from the Caspian region of Kazakhstan to the Russian port of Novorossiysk on the Black Sea. Its corporate structure is divided between two companies, one Kazakh and one Russian.

The Russian court drew attention to the documentation relating to Oil Spill Response Plan Russian company, stating that the deficiencies pose a threat to the environment. A possible suspension of the pipeline for one month, which by default would also affect the Kazakh section, would be a serious blow to the state budget and net profits of companies.

The largest American company Chevron owns 15 percent of CPC shares. On July 6, the day of the judgment, Chevron’s share price fell 3.5% on Wall Street.

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The transformation of a potentially dangerous suspension into a symbolic fine on July 11 is perhaps a strong indication that pressure on the pipeline is largely political.

Just one week before the initial CPC sanction paid the equivalent of $86.3 million in environmental fines for the 2021 spill in Russia.

Environmental claims are one of the preferred methods of political pressure on hydrocarbon companies and projects. Both the Russian and Kazakh governments have used environmental fines to generate additional revenue from oil and gas consortiums or to acquire stakes in projects.

This took place for Kashagan offshore oil field in the Kazakh part of the Caspian Sea in the first decade of the 2000s. The same was true in 2012, when the environmental fine turned into a sale of a stake in Karachaganak gas condensate field in northern Kazakhstan.

rocky connections as well as public friction between Russia and Kazakhstan since the beginning of the war in Ukraine, undoubtedly contributed to a sharp resolution of issues related to the CPC. In March, a storm allegedly caused massive failures at the marine terminal of the pipeline; now the Russian judiciary has essentially flexed its muscles, advertising a disruption that would stifle Kazakhstan’s main export vector.

In response, President Kassym-Jomart Tokayev urged government meeting to rectify the situation and potentially find viable alternative routes for oil exports from the country.

The old Russian route from Atyrau to Samara could handle a maximum of 15 million tons per year, which pales in comparison to the 65 million tons that CPC can handle.

However, the Russian route remains the most cost-effective, as the pipeline to China can only transport 10 million tons of Kazakh oil (another 10 million tons are ordered by Russian suppliers through the Kazakh pipeline system), and its expansion by rail would entail huge transportation costs. according to industry experts.

“The railway tariff for oil transportation along the Makhambet-Atasu route is $64-65/ton. […] The railway tariff for the transportation of raw materials along the Makhambet-Dostyk/Altynkol route is $149-150/ton. It’s expensive,” wrote Nurlan Zhumagulov, director of KazService, a lobbying group for oil and gas service companies in Kazakhstan. facebook.

Another option might be Trans-Caspian routewhich currently involves transporting oil by rail from production sites to the port of Aktau, loading it onto barges and shipping it to Baku, Azerbaijan, from where it is then sent via the Baku-Tbilisi-Ceyhan (BTC) pipeline to a Turkish port in the Mediterranean Sea.

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However, scaling up this route over the past few years has proven costly and inconsistent. Potential pipeline construction revived in 2017 after the Aktau-Baku communication slowed down to the limit values. At the end of 2015, like in 2010it looks like the oil connection was in decline, but the war in Ukraine seems to have given it new life.

Dependence on transit countries is inevitable for Kazakhstan, as its geographic remoteness from its customers in Europe and its lack of access to the high seas preclude a direct connection.

The only significant direct link is with China. The Russian government pays transit fees for transporting oil through the Kazakh pipeline system to China and fulfilling the supply contract. If Russian-Kazakh relations continue to crack and the Caspian route becomes increasingly threatened, it is possible that the ripple effect will affect other aspects of energy cooperation between Russia and Kazakhstan.