Kazakhstan plans to transport oil through Azerbaijan from September

According to Reuters, negotiations on the prospect of selling up to 1.5 million tons of Kazakh oil per year through the Azerbaijani oil pipeline between KazMunayGas NC JSC  and the trading division of the State Oil Company of Azerbaijan are at the final stage.

Due to recent disruptions on the main export route of Kazakhstan’s oil – the Caspian Pipeline Consortium (CPC), it was urgently necessary to look for alternative ways, which the national oil company undertook. there are several great faults for entering the European markets despite the great opportunities of Baku–Tbilisi–Ceyhan (BTC) route.

The BTC pipeline connects the Sangachal terminal on the Caspian Sea shore with the Ceyhan Sea terminal on the Turkish coast of the Mediterranean Sea. The total length of the pipeline is 1,768 km, with a capacity of 1.2 million barrels per day.

At the same time, since the volumes of Azerbaijani oil are not enough for the total load, the pipeline owners are interested in transporting Kazakh oil to ensure profitability. Last year, 22.5 million tons of BTC capacity remained unused, which is almost half of the total capacity.

However, BTC is logistically more complicated and much more expensive than the CPC pipeline. Only 4 million tons of Kazakh oil have been transported in this direction over the past 10 years, .

To date, only tanker oil transportation is available through the Caspian Sea, and this influence  the final cost of hydrocarbons. Kazakhstan’s fleet is very limited, and the port infrastructure is not adapted to ensure the transportation of the required volume.

In addition to the limitations of the existing infrastructure, an important problem is a difference in the quality of Kazakh and Azerbaijani oil. The Azerbaijani side is likely to impose additional tariffs for pumping oil for mixing heavier Kazakh oil, which will also increase the cost of transportation.

The Trans-Caspian route development requires capital-intensive investments in infrastructure and clear agreements with interested parties. And this route will not be able to become an alternative to the CPC even with proper implementation, but only redirect part of the export oil bypassing Russia.

According to the IHS Markit model on export prospects until 2050, BTC is not considered as a route for Kazakh oil at all due to the availability of more cost-effective alternatives and a decrease in export volumes after 2035.

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