The Caspian Pipeline Consortium can continue to export Kazakh crude via its terminal on the Russian Black Sea port of Novorossiysk after Russian authorities decided against forcing a halt to shipments.
A Russian district court had earlier ordered the operator to stop oil loadings for 30 days after Russian transportation safety watchdog Rostransnadzor demanded a temporary halt in Caspian Pipeline’s operations, alleging deficiencies in the operator’s oil spill response procedures.
Bailiffs did not arrive at Caspian Pipeline’s storage terminal in Yuzhnaya Ozereyevka near Novorossiysk to enforce the court’s 5 July ruling, leaving the operator time to appeal, and a regional appeals court in Russia’s Krasnodar region replaced the 30-day suspension with a fine of 200,000 rubles ($3200), Caspian Pipeline said.
The looming threat of a shutdown had weighed on international oil markets prior to the reprieve, due to the current importance of the system to the stability of oil deliveries to Europe markets.
The European Union is attempting to wind down Russian crude purchases by the end of this year, as part of the bloc's response to Russia’s invasion of Ukraine in February.
Caspian Pipeline carries 80% of Kazakh crude exports via its pipeline network across Russian territory to the export terminal at Novorossiysk, but has been excluded from Western sanctions against Russia following the invasion of Ukraine because its network remains the major export route for Kazakhstan’s foreign-led Tengiz, Kashagan and Karachaganak oil producing projects.
The pipeline also carries smaller amounts of oil from Russian oil producers Lukoil and Rosneft.
Caspian Pipeline Consortium's exports were affected by maintenance work at the Kashagan offshore development in July, with exports reportedly running at an average 1.24 million barrels per day, although this has net yet been confirmed.
Production at Kashagan was reported at about 400,000 bpd before 1 June, when the field started to shut down wells to prepare for the maintenance work.
Caspian Pipeline exports are expected to recover in August as Kashagan operator North Caspian Operating Company (NCOC) has restarted the project’s offshore and onshore facilities by reopening wells and bringing production systems back online.
NCOC will now continue to step up output volumes with a primary focus on safety and production stability, it added.
Most of Kashagan’s output will flow via Caspian Pipeline to reach international markets, despite plans to build alternative export routes to underpin the planned growth in Kashagan.
After the original ruling against Caspian Pipeline, most analysts interpreted the threat of suspension a Russian warning to Kazakh authorities that the country should align its foreign policies with Moscow.
Last month, Kazakhstan President Kasym-Zhomart Tokayev told Russian President Vladimir Putin that his country would not acknowledge the independence of Luhansk and Donbass, the breakaway regions in eastern Ukraine whose interests Russia claims to be defending with its invasion.
However, a spokesperson for Tokayev said last week that “Russia will remain [Kazakhstan’s] strategic partner and ally” and added that the country will not engage in “any action to harm [Russian] interests. We hope that similar actions will not be taken against Kazakhstan either”.
This ambiguity was on show in January when Russian troops and law enforcement were airlifted to major cities in Kazakhstan to assist authorities in dispersing and calming nationwide street protests and riots.
European nations have resolved to wind down Russian oil export purchases by the end of this year to respond to the country’s invasion in Ukraine in February.
Brent crude prices eased on Monday , helped by the lessening threat of a Caspian Pipeline shutdown and by fears of new possible Covid-related restrictions in China.