Kazakhstan's oil is not looking for easy ways: where will tens of millions of tons go

The message of the Minister of Energy of Kazakhstan that Astana is considering alternative directions for transporting tens of millions of tons of oil has made a lot of noise. However, is this really the case?

"In 2024, it is planned to supply Kazakh oil through the Baku—Tbilisi—Ceyhan (BTC) oil pipeline in the amount of 1.5 million tons. The prospects of increasing supplies along this route in volumes up to 20 million tons per year are being studied," he said. To the Mazhilis of the Parliament of Kazakhstan, Minister of Energy Almasadam Satkaliyev.

He noted that the direction of BTC today is one of the most promising, as there is interest in the development and in a systematic increase in supply volumes from both Kazakhstan and Azerbaijani partners.

"The possibilities of the Baku—Supsa oil pipeline are being considered. The throughput capacity is 5 million tons per year, the possible supply volumes are up to 3 million tons per year. The use of this route is at the stage of elaboration and discussion," the head of the Ministry of Energy of the country added.

Almasadam Satkaliyev's statement caused a lot of noise, since the announced volumes are more than a quarter of the current exports from Kazakhstan. While alternative routes now account for just over 2% of Kazakhstan's exports.

However, does Astana really want to reorient the transportation of oil from oil pipelines that run through Russia to Novorossiysk and Ust-Luga?

It is obvious that part of the planned supplies by an alternative route is the growth of production in the country on projects related to Western companies.

Almasadam Satkaliyev stated at the same speech in The Majilis of the parliament said that this year oil production is projected at 88.4 million tons, and from 2026 — over 100 million tons.

"Tengizchevroil is implementing a future expansion project that will ensure an increase in oil production by 12 million tons per year. Work on the 5th compressor has been completed at Karachaganak, work is underway to introduce the 6th crude gas re-injection compressor, which will ensure the maintenance of production shelves at the level of 11-12 million tons per year," the minister said.

He explained that the Trans-Caspian International Transport Route (to Azerbaijan) is necessary taking into account the growth of oil production and the introduction of new offshore projects in the medium term.

Last year, 56 million tons of Kazakh oil were supplied to Novorossiysk via the oil pipelines of the Caspian Pipeline Consortium (CPC). CPC General Director Nikolai Gorban said at the time that the project had already been brought to a capacity of 76 million tons, which could be pumped from Kazakhstan.

However, whether the CPC will be loaded to the maximum or more will go to alternative routes through Azerbaijan, it will obviously be decided not so much by the Kazakh authorities. And the oil companies that own the lion's share of production at three megaprojects in the country. So, in Tengiz 75% belongs to American Chevron and ExxonMobil. At Karachaganak, 76.5% is distributed between the Italian Eni, the Dutch-British Shell and the American ExxonMobil. And in Kashagan, in turn, American, European and Japanese companies already own more than 90%. At the same time, the share of the national company "Kazmunaygas" ranges from 8.4 to 20%.

"And we discussed the possibility of increasing the pumping of Kazakh oil through the CPC to the port of Novorossiysk and further shipment of Kazakh oil to world markets. But it is not only Kazakhstani, there are also many foreign companies operating there, so we can say from the territory of Kazakhstan, but this product already has an international, international character," Russian President Vladimir Putin said after talks with Kazakh President Kassym—Jomart Tokayev in Astana.

Igor Yushkov, a leading analyst at the FNEB and an expert at the Financial University under the Government of Russia, believes that Kazakhstan will have to significantly expand its existing capacities under a significant increase in supplies through Azerbaijan.

"It is necessary to build additional capacities in the port of Baku for unloading tankers, to increase the fleet of tankers. Kazakhstan has brought new vessels to the Caspian Sea, but they will not be able to transport all 20 million tons. Further, we need a large terminal capacity in Kazakhstan and an underwater oil pipeline. And only after all these operations, in a few years, a system will appear to increase supplies in a roundabout way," the expert says.

In his opinion, in such a situation there is a question of economic feasibility. The expert gives an example of the fact that the tariff for pumping BTC is significantly higher than transportation by Transneft networks.

"In addition, it is necessary to deliver oil to the port. Transport to Baku. Therefore, there will be delivery via BTC — and again to tankers. Why do this if you can immediately load it into an oil pipeline and pump it to Novorossiysk, Ust-Luga or Germany. Now there are no obstacles for Kazakhstan to pump through Russia. Therefore, this is not a realistic story," adds Igor Yushkov.