Constraints limit Kazakhstan’s oil export potential despite surging demand

Oil producers in Eurasia and Central Asia are attracting renewed attention from Asian importers seeking to diversify supply as conflict in the Middle East disrupts traditional energy routes. Countries most exposed to the fallout from Iran’s closure of the Strait of Hormuz have in recent weeks turned to suppliers such as Azerbaijan and Kazakhstan, though structural constraints continue to limit how far this interest can translate into actual supply.

“Everybody would be interested in a new world in which Central Asian countries can export to the south,” Nick Coleman, associate director at London-based PRISM Strategic Intelligence, told Nikkei Asia, referring to plans for southern export corridors that transfer Kazakh oil that would bypass Russia. “But that isn't happening right now.”

Geography and infrastructure remain major obstacles to Kazakhstan’s ability to scale up exports, even as demand rises. South Korea recently sent an envoy to explore long-term supply options, while Japan’s Inpex has indicated plans to redirect oil from projects in Kazakhstan and Azerbaijan—traditionally sold to Europe—toward the Japanese market to address domestic energy insecurities.

The move reflects efforts to mitigate supply risks linked to disruptions in the Strait of Hormuz. Bangladesh has also turned to the region, with preparations in full swing for an order for 100,000 metric tons of refined diesel from Kazakhstan.

These developments highlight growing concern across Asia over supply stability despite a temporary ceasefire in the region. However, the article points out that Kazakhstan’s ability to respond remains constrained. 

Output rose by just 2% to around 1.7 million barrels per day in March, leaving limited room for further increases. The country is also bound by its commitments under the OPEC+ agreement, having previously exceeded production quotas and now having to implement compensatory cuts.

Domestic shortages further complicate the picture. Kazakhstan has imposed a ban on diesel exports to meet internal demand, restricting the scale of external deals such as the Bangladesh shipment, which analysts have described as a “goodwill gesture.”

According to the Japanese outlet, export infrastructure presents another major bottleneck. The Caspian Pipeline Consortium (CPC) route—Kazakhstan’s primary export corridor running through Russia to the Black Sea—has faced disruptions following Ukrainian drone attacks near Novorossiysk.

Exports via the pipeline dropped by as much as 45% earlier this year, a significant blow given that up to 80% of Kazakh oil flows through this route.

Alternative routes across the Caspian Sea or via pipelines to China and Europe offer only limited capacity and are unlikely to significantly alter supply dynamics.

Analysts note that one workaround involves swap arrangements rather than direct shipments. Under such deals, oil designated for Europe could be exchanged for volumes located closer to Asian markets, allowing companies to benefit from arbitrage opportunities.

At the same time, risks tied to the broader conflict persist. If hostilities involving Iran escalate, Nikkei Asia speculates that Kazakhstan’s own energy infrastructure could also come under threat, given the presence of major US firms such as Chevron and Exxon Mobil in key oil fields.

“There is a small but still significant threat to Kazakhstan's own oil infrastructure from the Iranians,” Coleman warned. “Kazakhstan is uncomfortably close to this conflict.”

By Nazrin Sadigova