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Why Oil Won’t Trade Above $100 This Year

Why Oil Won’t Trade Above $100 This Year

Commodity analysts at Standard Chartered…

Kazakhstan To Reroute Oil Flow From Caspian Pipeline

Kazakhstan will re-route some of its export oil to a pipeline in Azerbaijan as the Caspian Pipeline Consortium channel remains at risk of further suspensions, Reuters has reported, citing unnamed sources familiar with the matter.

In July this year, a Russian court ordered the suspension of oil flows along the CPC on the ground of environmental violation: a spill that occurred during the loading of a Greek-flagged tanker last year at the port of Novorossiysk. The company attributed the accident to equipment problems.

That court’s decision was overturned by a higher court, and flows via the CPC were started, but according to the Reuters report, the Kazakh state sees it as a vulnerability.

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The Caspian Pipeline Consortium is the world’s largest international oil transportation project involving Russian and Kazakh companies for the transportation of crude oil from Kazakh and Russian fields to the port of Novorossiysk on the Black Sea via a 1,500-km pipeline. Chevron has a 15-percent stake in the company.

Kazakhstan sends two-thirds of its oil exports via the CPC, which earlier this year was suspended for a month after damages suffered during a storm. Now, state oil company Kazmunaigaz is in talks with Azerbaijan’s SOCAR for a redirection of some flows via the Baku-Tbilisi-Ceyhan pipeline that ends in Turkey.

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Kazakhstan exports some 1.4 million bpd of crude, which is equal to about a percent of the global supply. However, based on the Reuters report, only a fraction of that would be redirected to the Azeri pipeline: 1.5 million tons annually, per one of the unnamed sources, which is about 30,000 bpd.

Yet this could be just the beginning, according to the sources. Starting from 2023, Kazakh could be exporting 3.5 million tons of crude annually via another Azeri pipeline to the Georgian Black Sea coast. With that, the total flow redirected from the CPC would come in at 100,000 bpd, Reuters calculates.

By Charles Kennedy for Oilprice.com

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