Fitch Solutions: Kazakhstan will export oil through Azerbaijan via two routes

Kazakhstan has negotiated with Azerbaijan to export via the Baku-Tbilisi-Ceyhan pipeline to Turkiye and is expected to begin exports via this route in September, Report informs, citing Fitch Solutions.

According to the agency analysts, at around 30,000b/d, the volumes will be minimal.

"An additional 75,000b/d could be sent via Azerbaijan to the Black Sea port of Supsa in Georgia or via rail, with the country having already ramped up its crude-by-rail shipments in the year-to-date. All these options, though, face considerable logistical constraints and any lasting shutdown of the CPC flows would lead to considerable curbs on the country’s oil production," the agency says.

"We see meaningful downside risk to the forecast stemming from the Ukraine war, given that Russia has control of Kazakhstan’s key export route. The bulk of the country’s crude (upwards of 1.2mn b/d) is exported by the Caspian Pipeline Consortium (CPC) via the Black Sea. In early July a Russian court in Novorossiysk order the CPC to suspend exports for 30 days, citing alleged violations of an oil-spill prevention plan. The CPC submitted an appeal and the suspension was rapidly reversed. While the decision may have been made on entirely technical grounds, there are concerns that Moscow could use its control over Kazakhstan’s exports (which account for over 1% of global supply) to tighten the market and raise prices, as the West continues to ratchet up its sanctions on Russia. Kazakhstan has limited export alternatives," it said.

According to the report, the government had initially targeted crude and condensate output of 87.5mn tonnes (around 1.76mn b/d) but has since revised down its estimate to 85.5mn tonnes (1.72mn b/d).

"The country’s Minister of Energy Bolat Akchulakov attributes the downgrade to several factors. One has been the ongoing, planned maintenance works at the key Tengiz oilfield, which began in August and are scheduled for completion in September. Production has also been interrupted due to a gas leak at Kashagan. Production at the field has since been resumed and is now said to be slowly ramping up to full capacity," the report says.