Azerbaijan reins in Kazakh drive to reduce oil transit via Russia
Azerbaijan said it would only be able to receive 2.2 million metric tons of Kazakhstan’s oil into its pipeline each year as it has a high sulphur content, curbing Astana’s efforts to reduce reliance on a Russian crude transit route.
Azerbaijan’s state energy company SOCAR and Kazakhstan’s KazMunayGas KMGZ.KZ signed an agreement in March to gradually increase the volume of Kazakh oil transported through the Baku-Tbilisi-Ceyhan (BTC) pipeline system to Turkey’s Ceyhan port to 2.2 million tons a year, from 1.5 million currently.
But Kazakhstan’s energy minister, Almasadam Satkaliyev, this week said, without giving a time frame, that this could rise to as much as 20 million metric tons a year as the country increases its output. It currently sends more than 80% of its oil exports via Russia.
SOCAR, in an interview with Reuters, said Kazakhstan’s exports via Azerbaijan could only rise to the previously agreed level due to ongoing discussions regarding an issue with oil quality.
“Currently we can take no more than 2.2 million tons from Kazakhstan for the BTC, so as not to spoil the quality,” Elshad Nasirov, SOCAR’s vice president said. “Buyers appreciate the low sulphur content of Azeri Light oil at the BTC outlet.”
Kazakhstan’s main CPC Blend grade is a light, sour crude sold at a significant discount to Azerbaijan’s flagship BTC grade that is an easier-to-refine medium, sweet grade.
Oil exports from Kazakhstan, the world’s largest landlocked country, account for more than 1.4% of world supply, or roughly 1.4 million barrels per day (bpd).
For 20 years, the country has routed its oil through the CPC pipeline – the most cost effective existing route – to Russia’s Novorossiisk port, but flows have frequently been interrupted by malfunctioning equipment at the Black Sea terminal.
Kazakhstan pursues a “multi-vector” foreign policy that balances its ties to Russia with other nations, such as China and European countries.
There have also been talks about possibly transporting 5 million tons of Kazakh oil via the Baku-Supsa pipeline, which runs from the Sangachal terminal near Baku to Georgia’s Black Sea port of Supsa.
However, SOCAR’s Nasirov said there were currently no ongoing negotiations with Kazakhstan on the matter.
Baku-Supsa flows were suspended in 2022 as BTC oil exports are considered to be more logistically attractive for Azeri oil exports.
Source: Reuters (Reporting by Nailia Bagirova and Olesya Astakhova; writing by Vladimir Soldatkin; Editing by Kirsten Donovan)