A recent session of Kazakhstan's cabinet of ministers commissioned plans for creating a trans-Caspian westbound export route for Kazakhstani oil, bypassing Russia on the shortest route to consumer countries. Prime Minister Daniyal Akhmetov and KazMunaiGaz (Kazakh oil and gas) state company chairman Uzakbay Karabalin endorsed the overall concept and initiated a detailed study of specific options. If opened by 2010 as envisaged, this route could ultimately handle at least one-third of Kazakhstan's oil exports in the ensuing decade.
The proposed route would connect Kazakhstan's super-giant offshore field Kashagan with Baku in Azerbaijan, there to plug into the Baku-Tbilisi-Ceyhan pipeline system. Kashagan, the richest oilfield discovered worldwide in the last 30 years, holds proven commercial reserves of 5.3 billion tons of crude oil.
The KCO multinational consortium prospected the field under a 1997 production-sharing agreement with Kazakhstan and intends to start commercial production at the field by 2007. KCO shareholders include (following a recent reshuffle): project operator Agip of Italy (subsidiary of the state-controlled ENI) with an 18.52% stake; ExxonMobil, Shell, and Total of France, also with 18.52% each; ConocoPhillips with 9.26%, and the Japanese-based Inpex and KazMunaiGaz with 8.33% each.
Under the production schedule, recently announced by Agip, production at Kashagan is slated to reach 10 million tons annually by 2010 and continue to increase rapidly afterward. For its part, Kazakhstan envisages trans-Caspian exports from Kashagan and other fields rising to 38 million tons of oil by 2016. This projection has just been revised upward from the previous estimate of 27 million tons. The revision stems from two factors: Russian extortionate demands on oil exporters using the pipeline to Novorossiysk, and acceleration of KCO's production schedule at Kashagan.
At present, oil exports from Kazakhstan total 40 to 45 million tons annually. Of these, 8 million tons are being shipped from the Aktau terminal by small-capacity tankers to Russia, Iran, and Azerbaijan en route to Georgia's Black Sea ports. These volumes are too small to be commercially attractive. The port of Aktau (which also handles dry cargos) is being used to the limits of its design capacity. Kazakhstan proposes to build an oil port south from Aktau in the Kuryk Bay, to be primarily dedicated to Kashagan and other nearby oilfields. Unlike Aktau, the Kuryk Bay provides a natural shelter that makes possible uninterrupted operations in winter and during storms.
Large-volume transport options include tanker shipment, a seabed pipeline, or combining the two to create a trans-Caspian system connecting Kazakhstan with Azerbaijan.
Oil producers in Kazakhstan currently use 6,500-ton tankers for their small Caspian-borne exports. Also available are 13,000-ton tankers. Large-scale exports from Kashagan and nearby fields to Baku require 60,000-ton tankers, five of which are thought to be necessary soon after 2010, according to Kazakhstani and Azerbaijani projections. A tanker line would also involve building ports and terminals. Whether such tankers can be transported to the landlocked Caspian Sea or must be assembled onsite, or even built in specially created shipyards, is one of the questions under discussion.
A pipeline from Kashagan or Kuryk to Baku or a nearby terminal would run approximately 700 kilometers on the seabed. Russia (in tandem with Iran) has long opposed this or any trans-Caspian pipeline, ostensibly for environmental reasons, but in reality for preserving its quasi-monopoly on the transit of oil and gas from the eastern Caspian shore. The United States favors a trans-Caspian pipeline that would bring oil from Kazakhstan into the Baku-Tbilisi-Ceyhan (BTC) pipeline in the next decade, once production growth in Azerbaijan levels off. According to Azerbaijan's state oil company chairman Natig Aliev, potential inputs into Azerbaijan's pipeline system from Kazakhstan could reach 25 million tons annually starting in 2010, and rise to 50 million by mid-decade -- a volume equivalent to BTC's throughput capacity. Aliev proposes enlarging BTC's capacity by 70% by using chemical agents and building additional pumping stations to carry the inputs from Kazakhstan.
However, at least part of the additional volumes from Kazakhstan can also be routed to Georgian ports on the Black Sea for shipment to Ukraine or Romania, and on to Central European countries. Georgian President Mikheil Saakashvili discussed this option during his March 31 visit to Kazakhstan with President Nursultan Nazarbayev. Ukraine favors this solution in order to support the Odessa-Brody-Gdansk project. For its part, Romania has large unused or underused refining capacities that could handle oil shipped from Kazakhstan via Georgia.
Four of the shareholding companies in the Kashagan consortium -- Agip, Total, ConocoPhillips, and Inpex -- are also shareholders in the BTC pipeline company. This overlap increases the chances of a timely start to the trans-Caspian oil pipeline project.
(Express-K [Almaty], Khabar, Trend [Baku], Oil and Gas Journal, May 5)