Kazakh oil to run via btc at any rate

Last week the President of Kazakhstan, Nursultan Nazarvayev in meeting with Russian President Vladimir Putin stated that Kazakhstan intends to transport major and even the entire volume of Kazakh hydrocarbon reserves to the world market via the territory of Russia. In this respect it is necessary to expand the capacity of the Caspian Pipeline Company (CPC) through the construction of the Burgas Aleksandrupolis oil pipelines.

Such statements by Kazakhstan actually satisfy Russia, because it is keen to participate and host transportation of the Caspian energy resources. Russia gas repeatedly on inexpediency of the construction of the Baku-Tbilisi-Ceyhan (BTC) pipeline, offering its means for Caspian oil delivery to the world market. From this aspect the Russian authorities urge that Azerbaijan has not enough oil reserves to fulfill the pipeline and it would be more profitable to connect it to the pipeline existing in Kazakhstan, which will further to the West via the territory of Russia. However, the concerns participating in the construction selected the cheaper, from the viewpoint, project bypassing Russia.

The western partners have a long and substantially cooperate with the Caspian littoral countries rich with oil and gas reserves, so that to direct export oil and gas beyond Russia. Thus, US Deputy Energy Secretary, Jeffery-Clay Cell stated to an opening ceremony of the BTC in July 2006 that the project enabled to realize many politicians' will through creating an alternative source o energy supply.

Use of the BTC indeed deprives Russia of unshared control over the Caspian energy resources, the reanimation of the Polish-Ukrainian oil pipeline project of Odessa-Brody-Plotsk-Gdansk also envisages policy on Russia's deprival from the western markets and replacement of the Russian oil pumped via it the Caspian oil delivered from Kazakhstan and Azerbaijan, while Georgia is invited as a transit partner. However, such a game actually cannot delight Russia. This country cannot refuse from a control over energy flows, which enables to contradict the domestic problems, as well as return the former imperialist power.

Coming out from this position, the Russian Government will go to the expansion of capacities of deliberately unprofitable CPC so that to transport more and more volumes of Kazakh oil. Russia can close eyes that CPC is an only main pipeline in the territory of Russia, which does not possess a control package, and obtain any economic privileges

The Burgas-Aleksandrapulolis oil pipeline [ Russia achieved an agreement with Bulgaria and Greece on its construction] will enable to export oil from the Black Sea ports to Europe, bypassing the Turkish straights. Kazakhstan, which delivers its oil via the CPC namely to the Black Sea, would like to increase its export with the consideration of this opportunity.

Meanwhile, such statement by the Kazakhstan President caused broad discussions in Azerbaijan, which was concerned on Kazakhstan's possible refusal from the agreement earlier achieved on the oil transportation via the BTC. The final opinions urged that even if the Russian-Kazakh plans on Kazakh oil transportation via Russia are carried out in several years, the transportation of entire volume of Kazakh oil via the territory of Russia is almost impossible due to technical limitations.

According to Sabit Bagirov, head of the Center of Political and Economic Researches, a decision on export of Kazakh oil is taken not only by the Government. The oil production is divided between the contractors (in this case the foreign companies) and the Government. The Kazakh government enjoys a right of handling their own share of oil, while a handling the share of foreign companies is a prerogative of the companies themselves and they can export their oil via the route which economically feasible. As companies operating in Kazakhstan are the founders and participants of the BTC, the Kazakh oil, as minimum the share of these companies, will be transported via the Baku-Tbilisi-Ceyhan. Four companies, which shareholders of BTC (ENI, INPEX, ConocoPhillips and Chevron), are operating in the Kashagan field of Kazakhstan and hold 15% of stake in the pipeline.

Presidents of Azerbaijan and Kazakhstan signed a joint agreement on Support and assistance to oil transportation from Kazakhstan via the Caspian Sea and Azerbaijani territory to the world markets through the Baku-Tbilisi-Ceyhan in Almaty on 16 June 2006. "BTC is an attractive project for increase of our export potential and Azerbaijan is our reliable partner in this sphere," the President of Kazakhstan, Nursultan Nazarbayev stated. In condition of increase of hydrocarbons production Kazakhstan faces a necessity of searching additional export ways, and in this respect pins great hopes on the BTC.

Kazakhstan can commence the oil pumping via this route from 2007. Kazakh oil will be loaded from tankers to the oil pipeline, while by 2010 the participants in the project expect to build a subsea Trans-Caspian oil pipeline Mangishlak-Baku. Kazakhstan has established in the Caspian Sea the Aktau Port, which is necessary for oil export via Azerbaijan. It is also planned to build a new port in Aktau in Kazakhstan for delivery of Kazakh oil to the Baku-Tbilisi-Ceyhan pipeline.

With the commencement of first oil production from Kashagan in 2010, during the implementation of the first phase of the project, it is planned to deliver approximately 350,000 barrels of oil per day via the BTC.

Experts note on the top of oil production, even with the use of all existing routes (with the consideration of full expansion of heir discharge capacity), Kazakhstan will feel deficit in export capacities. According to specialists' forecasts, by 2015 Kazakh will be higher than the export capacities allow: total oil reserves of Kazakhstan, including the explored and forecasted, ranges from 50bln to 100bln barrels and are enough to cover 2%-3% of the world demand over the past subsequent 10 years. Therefore, part of Kazakh oil will at any rate transported via the BTC.

In 2006 the volume of oil export along with the condensate from Kazakhstan made up 57.2mln tons (increase of 10.6% with respect to 2005). Oil from Kazakhstan is mainly exported to European markets via pipeline systems CPC and Atirau-Samara, which comprises 57.9% and 37.1% respectively of the total volume of export in this direction.

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