Why developments in Kazakhstan matter for global oil & gas market?

Oil&Gas 17 January 2022 14:49 (UTC +04:00)
Why developments in Kazakhstan matter for global oil & gas market?

BAKU, Azerbaijan, Jan.17

By Leman Zeynalova – Trend:

With Kazakhstan being a major oil and gas producer, there is a clear energy dimension to the ongoing events, Trend reports with reference to Oxford Institute of Energy Studies (OIES).

OIES analysts note that Kazakhstan is connected to international traded energy markets at two points:

Its 1.3 million b/d crude oil exports through the CPC pipeline to the Black Sea directly enter the international market;
Indirectly, it plays a transit role in the transportation of around 30 bcma of Turkmen gas to China. This gas meets over 8 percent of China’s gas demand, and if China sought to replace this volume its only immediate recourse would be to the international LNG market. Its other response could be to increase its coal consumption to compensate, although the ability to switch is somewhat limited by the end users, which are mainly in the industrial and commercial sectors rather than power. Also, greater use of coal would clearly have a very negative emissions impact at a time when Beijing is looking to reduce its carbon footprint.

“These volumes are sufficiently material to have an impact on global oil and gas markets in the event of any physical disruption or even market anticipation of potential supply interruptions. While it is judged unlikely that any crude oil or gas supply disruptions would be for a long duration, even a short outage would move markets. Given that oil and gas markets are already tight, a small $2 per barrel rise in crude prices around 5th -6 th January was ascribed by one IOC trader to be some nervousness around CPC,” reads the OIES report.

All this is not to suggest that there will be any impact on crude and gas flows from any continuation of the events of the last week.

“It simply says that if something were to happen, then the crude and gas flows from Kazakhstan are of sufficient magnitude to have an immediate impact on global oil and gas markets. Blowing up pipelines is a very difficult thing to do. More likely, any disruption could be the result of staff failing to work at pumping and compressor stations,” the report says.


Follow the author on Twitter: @Lyaman_Zeyn