OIL EXPORT ROUTES FROM KAZAKHSTAN
Kazakhstan is landlocked and is far from international oil markets. The lack of access to the open ocean makes the country dependent mainly on pipelines to transport its hydrocarbons to world markets. Since independence, Kazakhstan has successfully expanded and diversified its export capabilities.Major crude oil export pipelines currently include: 1) the Caspian Pipeline Consortium pipeline to the Black Sea port of Novorossiysk; 2) the Kazakhstan-China pipeline; and 3) the Uzen-Atyrau-Samara pipeline to Russia.
Kazakhstan also exports crude oil via the Caspian Sea and via rail. Oil is loaded onto tankers or barges at Kazakhstan's port of Aktau or the smaller Atyrau port and then shipped across the Caspian Sea, where it is loaded onto the Baku-Tbilisi-Ceyhan pipeline or the Northern Route pipeline (Baku-Novorossiysk) for onward transport, mainly to Europe. Additionally, Kazakhstan has an extensive rail network, which it increasingly uses to transport liquid fuels both for domestic consumption and for exports. Tengizchevroil is the largest petroleum user of the rail network. It loaded approximately 70,000 barrels a day of petroleum liquids onto rail cars for transport in 2013.12 Continued expansion and diversification of Kazakhstan's petroleum liquids transport capacity, particularly export capacity, is key to its future ability to increase production. [Source: U.S. Energy Information Administration (EIA) ]
Another potential export route for Caspian crude oil is via swaps with Iran. For years, Kazakhstan and other Central Asian countries delivered their crude to Iran's Caspian Sea port of Neka. From there the crude was delivered to refineries in Tehran and Tabriz, with the refined products distributed and consumed in northern Iran. In exchange, Iran exported equal volumes of crude out of its Persian Gulf ports on behalf of Kazakhstan. Swap volumes have varied over the years, with little to no crude swapped over the past two or three years. Sanctions against Iran reportedly complicated swap arrangements, especially the marketing of the crude exported in the Persian Gulf, which had been done by the Iranians. Also complicating the swap arrangements was Iran's desire to raise the fee it charged Kazakhstan for each barrel of crude swapped. Since at least late 2013, Iran and Kazakhstan have been discussing resumption of the swap arrangement and have periodically announced their intentions to resume swaps, but no swaps have occurred as of the end of 2014.
Pipelines and Kazakhstan
Kazakhstan's pipeline system is operated by the state-run KazTransOil, a subsidiary of KazMunaiGas, which runs approximately 3,400 miles of pipelines. Because of Kazakhstan's landlocked location and the continued use of Soviet-era infrastructure, much of Kazakhstan's oil and gas export infrastructure is integrated with major Caspian oil and natural gas export routes that interlink the region. Kazakhstan is also a transit country for natural gas pipeline exports from Turkmenistan and Uzbekistan. Since independence, Kazakhstan has successfully expanded and diversified its export capabilities. Major crude oil export pipelines currently include: 1) the Caspian Pipeline Consortium pipeline to the Black Sea port of Novorossiysk; 2) the Kazakhstan-China pipeline; and 3) the Uzen-Atyrau-Samara pipeline to Russia. Kazakhstan is also a transit country for natural gas pipeline exports from Turkmenistan and Uzbekistan. [Source: U.S. Energy Information Administration (EIA) ]
Pipelines: A) oil: 11,313 kilometers; B) gas: 12,432 kilometers; C) condensate: 658 kilometers; D) refined products: 1,095 kilometers; E) water: 1,465 kilometers (2013). [Source: CIA World Factbook =]
Because Kazakhstan is a vast country producing large amounts of oil and natural gas, pipelines receive high priority in transportation planning, and their location and funding have been controversial issues. In 2006 Kazakhstan had 11,019 kilometers of natural gas pipeline, 10,338 kilometers of oil pipeline, 1,095 kilometers of pipeline for refined products, and 658 kilometers for gas condensate. Poor management and distribution of the domestic pipeline system have necessitated importation of natural gas, and foreign investment has concentrated on export lines. [Source: Library of Congress, December, 2006 **]
Kazakhstan is linked to the Russian pipeline system by the Atyrau–Samara line, whose capacity was increased in 2001, and to Russia’s Black Sea oil terminal at Novorossiysk by the Caspian Pipeline Consortium line. In late 2005, the Atasu–Alashankou oil pipeline was completed between eastern Kazakhstan and Xinjiang Province in China. That 970-kilometer line has a capacity of 20 million tons per year. In 2006 work was underway to extend that line from Atasu to Atyrau on the Caspian Sea, making the total length 2,900 kilometers. **
Kazakhstan uses the Baltic Pipeline, which runs from Samara on the Volga River to the relatively new terminal of Primorsk, near St. Petersburg. A branch connecting Atrrau in Kazakhstan Atyrau to Samara was completed in 2003.
Kazakhstan Pipelines in the 1990s
Initially, after Kazakhstan became independent in 1991, most of its oil was shipped through Russia. Russia had a monopoly on pipelines in the former Soviet Union and manipulated oil flow through choke points. It put limits on the amount of oil Kazakhstan and other former Soviet republics could pump, set high tariffs and siphoning off oil for it domestic market.
Pipelines: In 1992, some 3,480 kilometers for natural gas, 2,850 kilometers for crude oil, and 1,500 kilometers for refined products. Systems mainly connected with Russian lines to north; new lines were in the planning stage, with Western aid, to connect with Europe and other international destinations. [Source: Library of Congress, March 1996 *]
The oil pipeline system was designed to ship domestic oil, most of which is in the western part of the republic, and to bring Russia's Siberian oil to Kazakh refineries. Construction of pipelines that would bring Kazakhstan's oil to world markets was a major obstacle in the development of the Tengiz field because of disagreements over routing, financing, and ownership. *
Russian control of Kazakhstan's only pipelines to the outside world restricted oil exports to the West and discouraged foreign investment in the oil and gas industries. In 1995 Kazakhstan, Turkmenistan, and Azerbaijan, all of which have suffered export shutdowns in their cross-Russia pipelines, began discussing a massive pipeline project that would bring their products across China to the Pacific Ocean and into Japan. *
Pipeline to the Black Sea
The Caspian Pipeline Consortium (CPC), a new $4 billion pipeline from the Tengiz oil fields of Kazakhstan to the Black Sea, opened in 2001. It goes 1,580 kilometers (948 miles) from Atyrau on the northen coast of the Caspian Sea to the Russian port of Novorossiysk on the Black Sea. From there the oil goes by tanker through the Bosphorus to the Mediterranean. It bypasses Chechnya by going through Dagestan. The pipeline has a 10 mile link to the Dagestan seaport of Mahachkala, which can take crude from facilities from Kazakhstan and Turkmenistan.
The Black Sea pipeline has a carrying capacity of 67 million tons and delivers an average 130,000.barrels a day. Chevron Texaco and Exxon Mobile both have large stakes in this pipeline. The problem with it is that only relatively small ships—60,000 metric tons—are allowed through the Bosphorus. If the oils continues to the United States it is unloaded and reloaded onto a larger ship.
In order to increase the CPC output and delivery range, Kazakhstan has negotiated the use of a newly built pipeline from Odessa in the Ukraine to Brody on the Polish border with an addition to the Polish port of Gdansk. Completed in 2006, this pipeline has a capacity of 67 million tons.
Pipelines to China
A new 970-kilometer pipeline between western China and Kazakhstan opened in 2006. The Atasu–Alashankou oil pipeline was completed between eastern Kazakhstan and Xinjiang Province in China in late 2005. It has a capacity of 20 million tons per year.
A Chinese-Kazakhstan consortium is building a $3.5 billion, 2,900-kilometer-long (1,860 miles long) oil pipeline between Atyrau near the Caspian Sea in western Kazakhstan to Alashankou in western China, where it will connect with the pipeline to China’s east coast. The pipeline will initially have a capacity of 400,000 barrels a day and will ultimately carry 800,000 barrels a day.
Oil is great demand in energy-hungry China. The Chinese government has provided a lot of money to build pipelines between China and oil- and natural gas-rich Central Asia. Pipelines in Kazakhstan could also be used to transport oil in Siberia to China.
The Kazakhstan-China pipeline is being built in three stages. One of the most difficult obstacles was building the section over the Tien Shan mountains. Construction of the 970-kilometer-long first stage began in September 2004. Oil started flowing in December 2005 partly using the Russian networks or pipelines.
Proposed Pipelines for Kazakhstan
Lots of pipelines involving Kazakhstan are on the drawing boards. Kazakhstan wants to build a pipeline that would run under the Caspian Sea from Akytau, Kazakhstan to Baku, Azerbaijan, allowing Kazakhstan to connect to the BTC pipelines to the Black Sea and Turkey.
The Central Asia Oil Pipeline is a proposed pipeline that would send oil from Kazakhstan through Turkmenistan and Afghanistan to Pakistan’s Arabian Sea port of Gwadar. Kazakhstan also plans to build a pipeline along the eastern coast of the Caspian Sea to assist in it oil swap deals with Iran.
There is also discussion of building an oil pipeline from Kazakhstan and Turkmenistan across Iran to the Persian Gulf. This would greatly facilitate the export of oil to Asia. The United States opposes this plan because of Iran’s links to terrorism. Also raised, has been the idea of building a pipeline across Afghanistan and Pakistan to the port of Karachi. Another is through Iran, Pakistan to India.
Natural Gas Pipelines in Kazakhstan
Kazakhstan has two major export pipelines for natural gas. 1) The Central Asia Centre pipeline (CAC), which traverses the western edge of Kazakhstan on its way to Russia and points further west, and 2) the Turkmenistan-China pipeline, which traverses the southern edge of the country on its way to China. Both pipelines are part of the regional Caspian export infrastructure and mainly carry natural gas exports from Turkmenistan, along with smaller but still significant volumes of exports from Kazakhstan and Uzbekistan. The CAC pipeline also serves local natural gas demand in western Kazakhstan, including northwestern Kazakhstan where most of the country's production is located. A third major pipeline, the Bukhara-Tashkent-Bishkek-Almaty pipeline serves local demand in southern Kazakhstan with imported gas from Turkmenistan and Uzbekistan. Two of Kazakhstan's three underground gas storage facilities are located along this pipeline. [Source: U.S. Energy Information Administration (EIA) ]
Kazakhstan relied on pipelines owned by the Russian natural gas monopoly Gazprom to ship its natural gas. As of 2004, Kazakhstan was able to export up to 8 billion cubic meters (283 cubic feet) of gas but could not get it to European markets because of Gazprom, who according to one executive in Kazakhstan was “not being very helpful.”
The domestic pipeline system in Kazakhstan is underdeveloped. Natural gas production in the country is concentrated in the northwest and is not connected to population centers in the south, north, center, and east. A government objective is to develop a domestic natural gas system that would connect the country's producing and consuming areas. Kazakhstan is already on its way to meeting the first part of this challenge, connecting the existing gas pipeline infrastructure in the West to the existing infrastructure in the densely-populated South. The Beineu-Bozoi-Shymkent pipeline is under construction and is expected to be completed by the end of 2015 with a capacity of approximately 350 Bcf per year. This pipeline will allow Kazakhstan to gasify communities along the route of the pipeline that previously had no access to gas. It will also connect to the existing pipeline serving southern Kazakhstan, replacing imported natural gas in those markets. Finally, it will connect to the pipeline to China, allowing production from northwestern Kazakhstan to be exported to China.
Plans for gasifying other parts of the country and connecting them to the existing infrastructure in the West and South are more uncertain. The vast distances and relatively low population density in the north, center, and east make the economics challenging for any potential gas pipeline projects to serve the region.
Oil Swaps Involving Kazakhstan
Kazakhstan has engaged in oil swaps with Iran in which Kazakhstan oil is transported across the Caspian Sea by tanker to the Iranian refineries. The oil is used in northern Iran and the Tehran area. An equivalent amount of Iranian oil is then shipped from Iranian ports on the Persian Gulf to customers around the world. These customers pay Kazakhstan. Iran gets the Kazakhstan oil and fees for refining it. Similar swaps have been arranged with Russia. Caspian Sea oil can be moved up the Volga River by barge to the refinery in Volgagrad or further upriver to Samara. Russian oil then can be shipped to markets in Europe and elsewhere. The oil swamps with Russia have been replaced by a new pipeline.
For years, Kazakhstan and other Central Asian countries delivered their crude to Iran's Caspian Sea port of Neka. From there the crude was delivered to refineries in Tehran and Tabriz, with the refined products distributed and consumed in northern Iran. In exchange, Iran exported equal volumes of crude out of its Persian Gulf ports on behalf of Kazakhstan. Swap volumes have varied over the years, with little to no crude swapped over the past two or three years. Sanctions against Iran reportedly complicated swap arrangements, especially the marketing of the crude exported in the Persian Gulf, which had been done by the Iranians. Also complicating the swap arrangements was Iran's desire to raise the fee it charged Kazakhstan for each barrel of crude swapped. Since at least late 2013, Iran and Kazakhstan have been discussing resumption of the swap arrangement and have periodically announced their intentions to resume swaps, but no swaps have occurred as of the end of 2014. [Source: U.S. Energy Information Administration (EIA) ]
Among the advantages of the oil swaps of Kazakhstan is that the oil can reach the fast growing markets in east Asia. Oil swaps are cheap because they reduce the need for expensive pipelines. As of 2004, Kazakhstan was shipping about 20,000 barrels a day to Neka on the Iranian Caspian coast. Oil swaps with Iran have been highly politicized. The major obstacle has been objections by the United States about doing business with Iran. Mobile got into big trouble for trying to arrange oils swaps involving Kazakhstan and Iran.
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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.
Last updated April 2016