Analysts point to absence of alternative for oil transit from Kazakhstan to Europe through Novorossiysk

If the Caspian Pipeline Consortium is stopped, Kazakhstan will be able to supply Europe with only about 4 million tons of oil per year through Azerbaijan, Armenia and Georgia, which is ten times less than through Novorossiysk. And the construction of a new pipeline along the bottom of the Caspian Sea presupposes coordination with other coastal states, including Russia, analysts from the Transcaucasian countries interviewed by the "Caucasian Knot" pointed out.

The " Caucasian Knot " has reported that on July 6 it became known that the Primorsky District Court of Novorossiysk, at the suit of the Rostransnadzor department, suspended the activities of JSC "CPC-R" for 30 days due to violations in environmental documentation. On July 11, the Krasnodar Regional Court overturned the decision to suspend the operation of the Caspian Pipeline Consortium (CPC), which supplies Kazakhstani oil to Europe, for a month and commuted the punishment to a fine of 200,000 rubles.

The Caspian Pipeline Consortium is an international oil transportation project with the participation of Russia, Kazakhstan, as well as leading mining companies, created for the construction and operation of a trunk pipeline with a length of more than 1.5 thousand kilometers. The system receives oil mainly from the fields of Western Kazakhstan, as well as raw materials from Russian producers. JSC "CPC-R" is registered on the territory of Russia, JSC "CPC-K" is registered on the territory of Kazakhstan. The throughput capacity of the pipeline is 67 million tons per year, according to the website of the corporate publication Panorama KTK.

Weak logistics has become an obstacle to the transit of oil from Asia through the Caucasus to Europe

Kazakh oil companies can deliver about two million tons of oil in transit to Europe through Georgia. However, it will not be possible to quickly increase the throughput, since this is already an infrastructure issue for the Georgian railway and the throughput of ports, energy specialist David Mirtskhulava told the "Caucasian Knot" correspondent .

The main problem for increasing the volume of pumping Kazakh oil through Azerbaijan is the lack of transport infrastructure on the eastern coast of the Caspian Sea, said Ilham Shaban, head of the Caspian Barrel Oil Research Center .

“In principle, Azerbaijan is ready to pump up to 30 million tons of Kazakh oil per year through the Baku-Tbilisi-Ceyhan pipeline, taking into account the reduction in its own volumes. But the problem is the limited infrastructure of Kazakhstan itself. This country has the largest volumes of oil production at the Tengiz and Kashagan fields , Karachanak. The transport system for the delivery of oil from them to world markets was created under the CPC, that is, the Atyrau-Novorossiysk pipeline and partly the Atyrau-Samara oil pipeline. Aktau port is used to transship oil from Kazakhstan to Azerbaijan. However, there is no corresponding pipeline system from these fields. And by rail, the possibilities of transportation are limited.With this in mind, Kazakhstan will hardly be able to bring Azerbaijan's oil transshipment from the current 0.5 million tons to 1 million tons of oil by the end of this year,"Shaban told the "Caucasian Knot" correspondent.

According to him, the railway infrastructure of Kazakhstan to Aktau consists of a single-track road and it is possible to transport only about 3.5 thousand tons of oil daily through it, while the volume of pumping through the pipeline would be 70-80 thousand tons.

"However, to create such a pipeline system, it is necessary to build a line with a length of 700 kilometers to Aktau and another 400 kilometers from the eastern coast of the Caspian Sea to the western coast. But, the problem is that, in accordance with the Convention on the Legal Status of the Caspian Sea of 2018, the construction of underwater pipelines must be coordinated in terms of environmental protection with other coastal states, including the Russian Federation and Iran, which predetermines political obstacles to the implementation of such a project. Without a pipeline, only by rail and tankers, the volume of transportation will be very limited," Shaban explained.

"At the same time, it will still be necessary to build a pipeline through the territory of Kazakhstan to Aktau, expand the terminals there, and this will take at least three years and about 3-4 billion dollars of investment, which will affect the rise in the cost of pumping through Azerbaijan. But even with all this transshipment volumes through Azerbaijan will barely amount to a third of the current level of pumping through Russia - the CPC and the Atyrau-Samara pipeline," the analyst emphasized.

The authorities of Azerbaijan and Kazakhstan could discuss the issue of transshipment of Kazakh oil on July 5 at a meeting of the intergovernmental commission on economic cooperation. Also earlier, at the end of June, meetings of the ministers of foreign affairs and transport of Azerbaijan, Turkey and Kazakhstan were held, Shaban drew attention. In his opinion, despite the fact that the court in Krasnodar replaced the stoppage of the CPC with a fine, the authorities of Kazakhstan will look for an opportunity to increase exports via alternative routes, in particular through the South Caucasus, as well as to China.

Kazakh oil has been transported through the BTC pipeline since 2017. About 500-600 thousand tons of oil have already been pumped through Azerbaijan in this way from the Kazakhstani Buzachi field, Lada Yevgrashina, an energy analyst at Turan, said .

"Oil delivered by tankers from the Sangachal terminal enters the BTC through a 16-inch pipeline -" a jumper. Now Azerbaijan is building a new "bridge" - a 30-inch pipeline, which will be commissioned by the end of the year. The use of two "bridges" may allow increasing the volume of Kazakh oil pumped through the BTC to 3-3.5 million tons of oil per year. Considering that the existing infrastructure in Aktau is designed for transshipment of 4 million tons of oil, then the pumping of 3-3.5 million tons of oil through the BTC from next year is quite real," Yevgrashina told the "Caucasian Knot" correspondent.

To transship larger volumes of oil, Kazakhstan needs to invest heavily in its infrastructure, she said. She believes that under this condition, an infrastructure for transshipment of about 20 million tons of oil through Azerbaijan can be created within 3-4 years.

She also pointed out that Azerbaijan has a large tanker fleet and a shipbuilding plant, which is capable of producing new floating facilities for oil transshipment. The Azerbaijani side has already stated that the prices for transit will be the lower, the higher the volumes of pumping will be, Evgrashina reminded.

Regarding the transportation of Kazakh oil via the Baku-Supsa pipeline (Georgian Black Sea port) and railway from Azerbaijan to Georgian ports, Yevgrashina noted that oil traders are reluctant to buy hydrocarbons in the Black Sea due to high transportation and insurance costs. Kazakhstan now transports mostly oil products by rail to the Black Sea and only limited amounts of crude oil, Yevgrashina said.

Armenian analysts rule out crude oil supplies from Kazakhstan to Armenia

Armenia does not process oil, there is no corresponding infrastructure. Armenia can only import oil products, so it is unlikely that we can talk about the supply of crude oil, said Armen Manvelyan, senior researcher at the Institute of Oriental Studies of the National Academy of Sciences of Armenia .

"As for oil products, diesel fuel, in particular, is imported to Armenia from Iraq through Iran, and gasoline from Russia. Rosneft is the main monopolist in the Armenian market. There are several players who may start importing oil products from Kazakhstan - gasoline, which, it is doubtful that it will be competitive with Russian gasoline, since gasoline prices in Russia are falling," Manvelyan told the "Caucasian Knot" correspondent.

According to him, Kazakh gasoline can be imported through Russia or Iran. They can also go through Azerbaijan, but this route raises many questions. "Theoretically, maybe, but it's unlikely," the analyst said.

"The Armenian market for oil products - gasoline and diesel fuel - is small. Cars run on gas. Therefore, Iraqi diesel fuel is mainly imported, which has a quality problem, but is affordable. Kazakh gasoline will not be able to replace Russian gasoline. Most likely, this is an initiative of the Armenian authorities , which lobbies someone's personal interests," the analyst believes.

In addition to the fact that the Armenian oil market is small, the Russian side sets dumping prices, which makes Kazakh oil products uncompetitive, Manvelyan stressed.

They have been working on the agreement, which the Kazakh parliament has ratified, since 2018, Vahe Davtyan , president of the Energy Security Institute, said . "All this was carried out within the framework of the EAEU, and, in particular, the creation of a common market for petroleum products, which assumed that the national markets of the EAEU countries should be liberalized. Although the Armenian market is not monopolized, it operates on a cartel principle. There are several players who buy from "Rosneft" the lion's share of the fuel consumed, between which, in fact, there is a cartel collusion on the issue of pricing policy. Integration into the common market involves a revision of such models and the emergence of new players on the market, including from the EAEU countries, "Davtyan told the correspondent of Kavkazsky node".

The Armenian authorities are striving to redistribute the Armenian market of oil products, and they have recently forced this, he added.

"For Kazakhstan, the Armenian market is of no interest, and this is evident in the very agreement, which, in particular, states that deliveries will be carried out on a residual basis, given the share of Russian oil products in the Armenian market. Kazakhstan understands that the lion's share of oil products is Russian, and the Kazakh Minister of Energy said that they would not compete with the Russian company, and supplies would be carried out on a residual basis," Davtyan emphasized.

A few days ago, Kazakhstan imposed a ban on the export of petroleum products for six months to avoid a shortage of petroleum products in the domestic market, he added. “Given the situation on the international market, Kazakhstan decided to play it safe. So far, we can say that there is an Armenian-Kazakhstan agreement, this is a slight deepening of energy cooperation, but at the level of energy diplomacy there are no practical steps that would allow us to talk about the effectiveness of this agreement. That’s all for now on paper. Deliveries never started," the analyst said.

The only logistics along the Caspian Sea is to Azerbaijan, and then through Georgia to Armenia, Davtyan explained. "There is a conflict of interest through Iran. Iran is, although not a key, player in the Armenian oil products market - 20-25%. And there is a tendency to increase. There are players affiliated with the authorities, importing Iranian gasoline. There is no big geopolitics, the gasoline market is not politicized. This is a global trend. For example, the key supplier of oil products in the Georgian market is Russia. Especially in terms of diesel fuel," he explained.

There is no need to talk about price competition between Russian and Kazakh gasoline, since the prices for gasoline and diesel fuel are formed by the exchange. “Internal regulation is another matter. Kazakh gasoline in Kazakhstan is significantly cheaper than Russian oil products in Russia. But the entry of Kazakh oil products into the Armenian market will not mean a revision of the pricing policy. The market will not “break down”, just an additional player will appear. logistics," Vahe Davtyan believes.

One of the Armenian deputies of the oligarchs may be interested in the supply of Kazakh oil products to Armenia, and as soon as the embargo is lifted, the company belonging to him may become a key supplier, the analyst added.

"This company could not fit into the existing schemes and is sitting on Iranian gasoline and diesel fuel. Key players work with Rosneft, and the established schemes work effectively. Now [the deputy's company] is developing the Iranian direction, but as soon as the Kazakh direction is activated, the key operator this company will become," Vahe Davtyan concluded.