Kazakhstan is expected to sell some of its crude oil through Azerbaijan's largest oil pipeline from September as the country seeks alternatives to a route Russia has threatened to shut down. This was reported by Reuters , citing three sources familiar with the matter.
As you know, Kazakhstan now supplies most of its oil through the CPC pipeline, which goes to the Russian Black Sea port of Novorossiysk. From there, oil enters the world market. However, in July 2022, a Russian court threatened to suspend CPC, prompting the Kazakh government to consider alternative, more reliable supply routes.
Now, Reuters has learned that the Kazakh state company KazMunayGas (KMG) is negotiating with the Azerbaijani oil company SOCAR. KMG wants to sell 1.5 million tons of oil per year through the Azerbaijani pipeline, through which oil is delivered to the Turkish port of Ceyhan.
The contract is expected to be signed at the end of August, and deliveries via the Baku-Tbilisi-Ceyhan (BTC) pipeline will begin in a month.
So far, there is no talk of the new route becoming a full-fledged replacement for the Russian pipeline. The volume of 30 thousand barrels per day, which is planned to be pumped through the Azerbaijani pipeline, is ten times less than 1.3-1.4 million barrels per day, which pass through the route of the Caspian Pipeline Consortium (CPC).
Another 3.5 million tons of oil per year may begin to be exported in 2023 through another Azerbaijani pipeline - to the Georgian Black Sea port of Supsa. After that, the total volume of supplies via both routes will amount to 8% of what is exported via the CPC pipeline.
Tengizchevroil, a joint venture between Chevron and KazMunayGas, is also negotiating new supply routes, sources told Reuters. In this case, the BTC pipeline is also considered as a possible option. Tengizchevroil already used an alternative route through the Georgian port of Batumi in April, when the CPC marine terminal was partially disabled due to a hurricane.
Kazakhstan daily supplies the world market with approximately 1.4 million barrels per day. This is approximately 1% of world supplies. The simultaneous withdrawal of such a quantity of oil from the market can lead to a jump in prices for this energy carrier. Observers admit that Russia may use the CPC pipeline to increase pressure on the West.