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HomeEconomicsKazakhstan Oil Exporters Relieved as Russian Courtroom Lifts Ban on Pipeline   –...

Kazakhstan Oil Exporters Relieved as Russian Courtroom Lifts Ban on Pipeline   – The Diplomat


Pipeline politics continues to seize headlines in Kazakhstan. When a Russian court docket ordered the Caspian Pipeline Consortium (CPC) to halt operations, citing administrative violations, on July 6, Kazakhstani exporters puzzled how would they ship oil to their overseas clients, as 80 p.c of the nation’s exports journey by the pipeline.

Political and enterprise stress helped reverse the court docket’s resolution on July 11, because the 30-day suspension was re-negotiated right into a effective equal to only $3,250. The oil trade in Kazakhstan sighed in reduction.

Inbuilt 2001, the CPC is a semi-private, worldwide pipeline, working from Kazakhstan’s Caspian area to the Russian port of Novorossiysk on the Black Sea. Its company construction is break up between two firms, one Kazakhstani and one Russian.

The Russian court docket focused the documentation relating to the Oil Spill Response Plan of the Russian firm, saying the shortcomings represented an environmental menace. The potential one-month suspension of operations on the pipeline – which might have by default concerned the Kazakhstani part as nicely – would have been an enormous blow to the federal government’s price range and the businesses’ backside line.

U.S. main Chevron owns 15 p.c in CPC. On July 6, the day of the court docket resolution, Chevron’s share value dropped by 3.5 p.c on Wall Road.

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The reversal of the doubtless crippling suspension right into a symbolic effective on July 11 is maybe a robust indicator that the stress on the pipeline is principally political.

Only a week earlier than the unique sanction, CPC had paid the equal of $86.3 million in environmental fines for a 2021 spill in Russia.

Environmental injury claims are among the many most popular strategies of political stress on hydrocarbon firms and tasks. Each the Russian and the Kazakhstani governments have used environmental fines to extract extra income from oil and fuel consortia or to accumulate stakes within the tasks.

This was the case for the Kashagan offshore oilfield in Kazakhstan’s part of the Caspian Sea within the first decade of the 2000s. The identical utilized in 2012, when an environmental effective was was the sale of a stake within the Karachaganak fuel and condensate discipline in northern Kazakhstan.

The rocky relations and public frictions between Russia and Kazakhstan for the reason that begin of the struggle in Ukraine have undoubtedly contributed to the acrimonious administration of the problems regarding CPC. In March, a storm allegedly triggered huge disruptions on the pipeline’s marine terminal; now the Russian court docket system primarily flexed its muscle groups, touting a disruption that will choke Kazakhstan’s major export vector.

In response, President Kassym-Jomart Tokayev known as a authorities assembly to handle the scenario and probably discover viable various routes for the nation’s oil exports. 

The outdated Russian route from Atyrau to Samara may solely pump a most of 15 million tons per yr,  which pales compared to the 65 million tons that CPC can pump.

Nonetheless, the Russian route stays essentially the most economically viable because the pipeline to China can solely carry 10 million tons of Kazakhstani oil (one other 10 million tons are booked by Russian suppliers by the Kazakhstani pipeline system) and its enlargement through rail would entail huge transportation prices, in response to trade specialists.

“The railway tariff for oil transportation alongside the Makhambet-Atasu route is $64-65/ton. […] The railway tariff for the transportation of uncooked supplies alongside the Makhambet-Dostyk/Altynkol route is $149-150/ton. That’s costly,” Nurlan Zhumagulov, director of KazService, a foyer group for oil and fuel service firms in Kazakhstan, wrote on Fb.

Another choice could possibly be the Trans-Caspian route, which for now entails transferring oil through rail from the extraction websites to the port of Aktau, loading it onto barges and delivery it to Baku, Azerbaijan, the place it’s then channeled through the Baku-Tbilisi-Ceyhan (BTC) pipeline to a Turkish port within the Mediterranean Sea.

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This route, nonetheless, has proved to be costly to scale up and fickle over the previous few years. The potential building of a pipeline was re-kindled in 2017 after the Aktau-Baku connection slowed right down to marginal portions. In late 2015, identical to in 2010, it seemed just like the oil hyperlink was at its twilight, however the struggle in Ukraine appears to have given it a brand new life.

Counting on transit nations is unavoidable for Kazakhstan, as its geographic distance from its clients in Europe and lack of entry to open seas impede a direct connection. 

The one substantial direct hyperlink is with China. The Russian authorities is paying transit charges to maneuver oil throughout the Kazakhstani pipeline system to succeed in China and fulfill its provide contract. Ought to the Russo-Kazakhstani relationship additional crack and the Caspian route be more and more threatened, it’s doable that the ripple impact may even have an effect on different features of vitality cooperation between Russia and Kazakhstan.

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