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Wednesday, 07 January, 2009, 21:10 GMT | more >>

Nazarbayev likes Russian route



By Upstream staff 

Kazakhstan's President Nursultan Nazarbayev said today he was in favour of almost all Kazakh oil being exported via Russian territory.

"Kazakhstan is absolutely in favour of exporting the majority of its oil, if not all of it, via Russian territory," Nazarbayev said during a meeting with Russian President Vladimir Putin, who is visiting Kazakhstan.

Kazakhstan is expected to be a major source of new crude oil supplies over the next decade but its Central Asian location means it is forced to export via other countries' territory to reach the main markets.

Most of its oil goes to European refiners who, wary of over-reliance on Russia, see Kazakhstan as a new and competing source of oil. Chinese refiners also look to Central Asia as a potential energy source to fuel China's roaring economy.

Nazarbayev's words may cool those expectations.

Last year Kazakhstan exported 52.3 million tonnes of oil (1.1 million barrels per day). Of that total, about 80% went via Russia, which has a Soviet-era pipeline network connecting its oilfields - and those of Central Asia - to European refineries.

Russia faces several challenges to its powerful pipeline patronage. Kazakhstan has begun exporting oil via a new pipeline to China and it also has several options to send oil west via Azerbaijan, which lies just across the Caspian Sea.

Both routes could be expanded in future, as could another, the Caspian Pipeline Consortium (CPC), which runs across Kazakh and Russian territory to the Black Sea port of Novorossiisk.

Although CPC is led by US supermajor Chevron, its presence on Russian soil, where normally only Russian state pipeline monopoly Transneft can operate, means it has to get the Kremlin's backing if it wants to expand.

CPC's management has been pushing for years to expand capacity to 1.35 million bpd from the current 750,000 bpd, which would enable more Kazakh oil to reach European markets, but it has hit a brick wall in trying to convince Russia, a Reuters report said.

Nazarbayev indicated there would be a limited expansion, falling far short of Chevron's hopes.

"Now there is the question of expanding the CPC pipeline. We have discussed it in detail - to 40 million tonnes (833,000 bpd)," he said.

Transneft, which recently took over Russia's 24% stake in CPC, has maintained Moscow's opposition to expansion, arguing that it would increase costs and push back the date when Russia first sees profits from the project.

Russia wants the consortium to charge higher fees, which experts say could damage the pipeline's competitiveness.

It also wants CPC to help fund a new pipeline it is building to bypass the Turkish Bosphorous straits. The straits are already clogged with ships and extra oil from an expanded CPC would only create more traffic.

Russia has also hit the group with a 4.7 billion rouble ($182.7 million) back tax claim for 2002-2003 and is currently checking its accounts for 2004-2005.

Apart from CPC, Kazakhstan exports around 15 million tonnes (312,000 bpd) of oil a year along the Atyrau-Samara pipeline to central Russia, 10 million tonnes (208,000 bpd) via the Caspian Sea and 5 million tonnes (104,000 bpd) to China via the Atasu-Alashankou pipeline, which can be expanded to 400,000 bpd.

Thursday, 10 May, 2007, 09:44 GMT  | last updated: Thursday, 10 May, 2007, 13:30 GMT

Let's get talking: Vladimir Putin and Nursultan Nazarbayev
 

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