Trend commentator: Kazakhstan-Azerbaijan-Georgia Energy Corridor has great prospects

Oil&Gas Materials 13 September 2010 17:54 (UTC +04:00)

Azerbaijan, Baku, Sept.13 / Trend /

Trend Commentator Emil Ismailov

Azerbaijan, Georgia and Kazakhstan have decided to double the amount of transportation of oil-related cargo within the Azerbaijan-Georgia corridor. This will benefit transit countries and shippers and ensure their energy security.

Kazakhstan's interest in this route is understandable. National company KazMunaiGas owns one of the largest oil terminals on the Black Sea at Batumi. In addition, this route can be used to provide the Rompetrol oil refinery in Romania, also owned by KMG, with raw materials. Earlier, Kazakhstan also repeatedly expressed an interest in the Samsun-Ceyhan oil pipeline passing through Turkey, and originating in the Black Sea. Regarding the importance of enhancing the corridor for Azerbaijan, the country will be able to increase its transit importance, which has both economic and strategic preferences.

At present, the corridor transports about 10 million tons of oil per year. According to the decision of the sides, these amounts will increase to 20 million tons per year. The reconstruction and modernization of existing infrastructure and in some cases establishment of facilities from scratch is needed to increase the amount of cargo transportation.

Azerbaijan intends to fully reconstruction of the Baku-Boyuk Kesik railway across the border with Georgia to increase the amount of oil transportation by rail. The modernization of the electrification system, tracks, purchase of new locomotives and tanks were noted in the Azerbaijani railways development program approved in 2010.

Today, this route particularly transports Kazakh oil from the Tengiz field. From Baku the oil is transported by rail to the ports of Batumi and Kulevi (SOCAR) in Georgia. The development of the corridor is also theoretically possible not only by increasing the capacity of the railway, which is currently limited, but by involving pipelines that Azerbaijan currently owns. Moreover, the practice of transporting the Kazakh oil from the Tengiz field via the Baku-Tbilisi-Ceyhan oil pipeline is already available.

Previously, the possibility of transporting Kazakh oil through the Baku-Supsa and Baku-Novorossiysk has been repeatedly raised. At present, the participants of the project developing the block of the Azerbaijani offshore Azeri-Chirag-Guneshli fields ship oil via the Baku-Supsa oil pipeline.

Pumping the Kazakh oil through the Baku-Novorossiysk pipeline is not possible yet. Under the contract signed between Azerbaijan and Russia, the pipeline can pump only Azerbaijani oil; the contract does not envisage pumping of third countries' oil via the Baku-Novorossiysk. However, it has not been excluded that this issue can be reviewed.

The Kazakh side, in order to export its oil on world markets, is also considering the construction of a new Baku-Black Sea oil pipeline, mainly for Kazakh oil. However, this project is under development.

Today, Azerbaijan and Kazakhstan are actively cooperating to create the Kazakhstan Caspian Transport System (KCTS), which is expected to transport Kazakh oil via Azerbaijan.

The national oil companies of Kazakhstan and Azerbaijan - KMG and SOCAR - signed an agreement on basic principles of the implementation of the Kazakhstan Caspian Transportation System (KCTS) in 2008 in Baku. KCTS should provide an opportunity to transport oil to volume of 23 million tons, with a further increase of 35-56 million tons per year. At present, work is underway on a feasibility study.

After the collapse of the USSR, Azerbaijan and Kazakhstan did not have sufficient funds of their own for major energy projects and foreign capital was attracted to the countries' oil sector for this purposes, but now both the Azerbaijani and Kazakh sides are fully participating in the world energy market. Each, guided by their own interests, is trying to develop their proposed ideas and options for the implementation of various energy projects. The further strengthening of the partnership between the two countries will increase the significance of oil supplies from Kazakhstan through Azerbaijan in the global energy balance.