Status of pipeline projects in Kazakhstan as of December 2014

Kazakhstan Materials 30 December 2014 16:35 (UTC +04:00)

Astana, Kazakhstan, Dec.30

By Daniyar Mukhtarov - Trend:

Kazakhstan is a country that does not have access to an ocean. Therefore, access to export markets primarily takes place through pipelines. Today, the following pipeline projects are being developed in the country:

Caspian Pipeline Consortium (CPC) (Tengiz - Novorossiysk)

The Caspian Pipeline Consortium, also known as the CPC, is an international stock company constructing and operating the CPC pipeline, which stretches 1,500 kilometers, and connects the Western Kazakhstan fields (Tengiz, Karachaganak) with the Russian Black Sea coast (Southern Ozerevka terminal near Novorossiysk).

It is the largest route for oil transportation from the Caspian region to the world markets. The capacity of the first stage is 28.2 million metric tons per year, including 22 million metric tons of Caspian oil. Full capacity was reached in mid-2004.

The shareholders of the consortium are (Transneft (Russia) - 24 percent, CPC Company (Russia) - 7 percent, in total - 31 percent, KazMunaiGas (Kazakhstan) - 19 percent, Kazakhstan Pipeline Ventures LLC (Kazakhstan) - 1.75 percent, Chevron Caspian Pipeline Consortium Company - 15 percent, LUKARCO B.V. - 12.5 percent, Mobil Caspian Pipeline Company - 7.5 percent, Rosneft-Shell Caspian Ventures Limited - 7.5 percent, BG Overseas Holding Limited - 2 percent, Eni International N.A. N.V. - 2 percent, Oryx Caspian Pipeline LLC - 1.75 percent - 69 percent).

Project Status

The shareholders of the Caspian Pipeline Consortium (CPC) shipped 36.42 million metric tons of "CPC Blend" oil in January-November 2014 compared to 29.88 million metric tons in January-November 2013.

Around 3,769,168 metric tons of Kazakh and Russian oil were shipped on tankers in November, while this index was much smaller - 2,693,615 metric tons in the same month of last year, the consortium said.

The capacity expansion project is being implemented. It will allow increasing the CPC capacity from the current 35 million metric tons to 67 million metric tons per year (with anti-friction additives - up to 76 million metric tons per year) in 2015. The capacity of 52 million metric tons per year for Kazakh oil is expected to be available in the first quarter of 2015.

The work should be completed in 2015. Initially, the completion date was 2014.

The expansion project envisages modernization of five existing oil pumping stations and construction of ten additional stations (two - in Kazakhstan, eight - in Russia), six crude oil storage tanks in addition to four existing tanks (with a capacity of 100,000 cubic meters each) in Novorossiysk and a third mooring facility at the CPC Sea Terminal, as well as replacement of a 88 kilometer section of the pipeline in Kazakhstan for a large diameter pipe. The total investment in the project will be $5.4 billion.

The main work on the expansion project in Kazakhstan has almost completed.

Uzen - Atyrau - Samara oil pipeline

The Uzen - Atyrau - Samara oil pipeline envisages access to the Eastern Europe's markets through Russia. It is a unique warmed-up oil pipeline. The pipeline originates at the Uzen field and runs to the Atyrau oil refinery where it connects to the Samara or "Transneft" oil pipelines system.

Owners of the oil pipeline are the Kazakh transport company KazTransOil to the Russian border, and in Russian territory - Russian transport company Transneft.

The oil pipeline is operated by the Western branch of KazTransOil CJSC in Kazakhstan and Privolzhsknefteprovod JSC of Transneft on Russian territory.

The length of the Uzen-Atyrau-Samara oil pipeline is over 1,380 km, with 1,232 km in the territory of Kazakhstan. Volume of pumped oil is 15.75 million metric tons per year. The maximum capacity of the oil pipeline is 30 million metric tons of oil. The proven capacity of the main oil pipeline in sections is: Uzen - Atyrau - 21 million metric tons per year, Atyrau-Samara - 15 million metric tons per year.

Project status

The Atyrau-Samara pipeline remains one of the key routes for Kazakhstan, but the country has no plans yet to expand exports in this direction.

Atyrau-Kenkiyak-Kumkol-Atasu-Alashankou oil pipeline (Kazakhstan-China)

The Atasu-Alashankou oil pipeline is a part of Kazakhstan-China main oil pipeline system.

The Atasu-Alashankou oil pipeline is owned by the Kazakhstan-China Pipeline LLP, a joint venture of KazTransOil JSC and China National Oil and Gas Exploration and Development Corporation (CNODC).

KazTransOil JSC is a national operator of Kazakhstan on the main oil pipeline. The company owns a 50-percent share in Kazakhstan-China Pipeline LLP and 51-percent of stocks in the MunaiTas North-West Pipeline Company JSC (MunaiTas NWPC JSC).

Project status

The implementation of the project on construction of the Kazakhstan-China oil pipeline is being carried out in two phases, with the pipeline's capacity standing at 10 million metric tons per year at the first phase, and increasing the capacity up to 20 million metric tons per year following the completion of the second phase.

The first phase of the project's implementation saw the construction of the Kenkiyak-Atyrau oil pipeline in 2003 (owned by the MunaiTas NWPC JSC) and the Atasu-Alashankou oil pipeline in 2006 (owned by the Kazakhstan-China Pipeline LLP).

Implementation of the second phase includes two stages. The Kenkiyak-Kumkol main oil pipeline (owned by the Kazakhstan-China Pipeline LLP) and the Kumkol Main Oil Pumping Station (owned by KazTransOil), were constructed in 2009 as part of the first stage.

During the second stage, plans are to reverse the crude oil pumping direction and construct four additional pumping stations in the Atyrau-Kenkiyak area, as well as construct three pumping stations in the Kenkiyak-Kumkol area and increase the capacity of Kumkol-Karakoin and Karakoin-Atasu oil pipelines.

The construction of the Kumkol-Karakoin oil pipeline and the main booster oil pumping station named after B. Dzhumagaliyev, as well as the reconstruction of the electricity supply system at the Barsengir oil pumping station were completed on Dec. 1, 2014.

These production facilities are important elements in the implementation of the Kazakhstan-China project, aimed at boosting the Kazakh oil exports to the consumers in China and securing the projected growth in the consumption of hydrocarbon feedstock by the country's domestic market. All of the facilities have been put into operation.

The capital construction of the third branch of the 198.9 kilometer long Kumkol-Karakoin oil pipeline in the area called "zero kilometer - head oil pumping station named after B. Dzhumagaliyev", running through the Karaganda region, is due to the further implementation of the project for expansion of the Kazakhstan-China pipelines system.

The construction of an additional branch of this oil pipeline is particularly needed to boost the export capacity and create technical capability of supplying Kazakhstan's oil to the domestic market, including to the Pavlodar Petrochemical Plant, as part of providing energy security of Kazakhstan.

The construction of the oil pipeline was carried out in stages in two sections.

The project's first phase - the construction of the Kumkol-Karakoin oil pipeline (0-26 km) bypass line - was launched in August 2012.

The state acceptance commission's statement on the acceptance of the facility into operation was signed May 30, 2013.

The construction of the second section (26 km - main pumping station named after B. Dzhumagaliyev) was launched in September 2013.

The state acceptance commission's statement on the commissioning of the second section of the pipeline was signed Sept. 30, 2014.

The Electro-XSBM LLP is the contractor for the facility's construction. The construction's total cost stood at 23 billion KZT (182.35 KZT = $1).

Construction of a booster pumping unit at the main booster oil pumping station named after B. Dzhumagaliyev using the modern horizontal pumping installations was started in July 2013.

The former booster vertical pumps, for over 20 years of their operation, have become obsolete and no longer met the requirements of reliability and energy efficiency. The new booster pumping unit has been equipped with modern horizontal pumps providing the pumping of oil to the Shymkent Oil Refinery, the main oil pumping station Atasu, and further to China.

Compared to the previous units, the new ones have improved hydraulic characteristics, a more safe design that will improve reliability, reduce energy consumption and the repair-maintenance costs.

The state acceptance commission's statement on the commissioning of the facility was signed Sept. 30, 2014.

The cost of construction was $1.1 billion KZT.

Reconstruction of power supply system on Barsengir oil pumping station (OPS), located on the Pavlodar-Shymkent oil pipeline in Zhezkazgan region of Kazakhstan, was launched in October 2013. The reconstruction was carried out in connection with the planned increase of pumping oil volumes on the Kumkol-Karakoin-Atasu-Alashankou oil pipeline. As a result of this work, the old worn-out electric equipment of the oil pumping station was replaced by the new one, which meets all modern requirements of energy efficiency and energy saving of the production facilities. The cost of the project amounted to 725 million KZT. Act of the state acceptance commission on the commissioning of the facility was signed October 31, 2014.

In December 2013, KazTransOil increased the capacity of Atasu-Alashankou oil pipeline to 20 million metric tons per year due to the commissioning of two oil pumping stations - OPS No.8 and OPS No.10. These objects were commissioned as part of the implementation of the second stage of the second phase of construction of the system of Kazakhstan-China main oil pipelines. The actual costs on No.8 amounted to 9.3 billion KZT (excluding VAT) for OPS No.10 - 11,6 billion KZT (excluding VAT). The construction financing was carried out at the expense of Kazakhstan-China pipeline LLP.

The joint Kazakh-Chinese companies, MunaiTas North-West Pipeline Company JSC and Kazakhstan-China Pipeline (KCP) LLP, plan to complete the reverse oil pipeline of Atyrau-Kenkiyak area in order to transport crude oil produced at fields of Western Kazakhstan in an easterly direction by 2016.

KazTransOil is the national operator of Kazakhstan on the main oil pipeline, which is a participant of these two joint ventures from the Kazakh side, currently actively promotes the project of reverse of the area from Atyrau to Kenkiyak. The work should be completed by 2016.

It is planned to build two pumping stations by joint ventures, one on the Atyrau-Kenkiyak site, and the second one between Kenkiyak and Kumkol for implementation of this project. KazTransOil itself will also build additional pumping stations for reversing.

The cost of the reverse project is estimated at about 50 billion KZT, which will be attracted at the expense of borrowing by MunaiTas North-West Pipeline Company JSC, which exploits Kenkiyak-Atyrau oil pipeline and Kazakhstan-China Pipeline LLP, the assets of which include Kenkiyak-Kumkol and Atasu-Alashankou oil pipelines built by it. All these areas form a system of Kazakhstan-China pipeline. It is known that the joint ventures will hold talks with banks, including the Chinese ones, on the issue of borrowing.

The source of the oil supplies on the reverse pipe will become oil of Kalamkas, Karajanbas, Uzen and other fields, whose raw material is currently supplied to the Atyrau-Samara pipeline, as well as the port of Aktau, with a view to its subsequent transportation across the Caspian Sea.

At the same time, given the commitment of Kazakhstan to the Transneft Russian company for filling of Atyrau-Samara system with oil, the capacity of which is over 15 million metric tons per year, it is not possible to divert volumes from this route for provision of supplies in the Eastern direction.

The matter rests in the transportation of additional oil, extracted by the Western Kazakh companies, via Atyrau-Kenkiyak oil pipeline. Perhaps, the volumes can be provided in case of reaching agreements with companies, developing the Tengiz, Karachaganak or Kashagan (after it will start operating) fields.

According to the intergovernmental agreement between Kazakhstan and China, loading of this pipeline is the responsibility of the Chinese side, according to the KazTransOil company. In particular, the Chinese have the right to use their equity share in the Kashagan project for the provision of Kashagan oil export to China.

The commitment of the Chinese side to buy Kazakh oil at world prices is also provided in the intergovernmental agreement signed by the parties. China should make the appropriate contracts for the sale of oil by 2016, i.e. by the moment when the reverse of Atyrau-Kenkiyak area will start operating.

In 2013, some 11.8 million metric tons of crude oil was transported towards China via the Atasu-Alashankou oil pipeline, according to the KazTransOil. In 2014, it is expected to transport the same volume of oil on this route towards China, including 7 million metric tons of transit oil from Russia, which wasn't transported in 2013.

During the 11 months of 2014, the volume of oil pumping to the Atasu-Alashankou oil pipeline totaled 10.8 million metric tons, which is similar to the 11 months of 2013, and exceeds the plan by 1 percent.

The volume of supply from Kazakhstan to China is decreasing in 2014, since KazMunaiGas has the obligation to provide the country's refineries with around 5 million metric tons of raw materials per year. So, the counter deliveries will be ensured by Russia in accordance with the agreement signed with this country.

Currently, Kazakhstan uses its own oil while loading Shymkent and Pavlodar refineries which previously used Russian raw materials for processing.

At its own discretion, the Russian side may increase the transit of its oil to China through Kazakhstan to 10 million metric tons per year. A corresponding agreement has already been signed between Russia and Kazakhstan. In total, the Omsk-Pavlodar pipeline has the capacity to transfer up to 25 million metric tons of crude oil per year.

Pumping of 20 million metric tons of oil via the Atasu-Alashankou section per year will start as soon as free oil emerges. Currently, there is a shortage of free oil. It is the second year that the oil production volume in Kazakhstan stands at slightly more than 80 million metric tons per year.

However, if China proposes favorable price for the oil of Kazakh oil producing companies, and consequently, if the volume of such supplies towards China increases, Aktau and Batumi sea ports, which hope for the growth of transshipments, can turn out to be uncompetitive with respect to China.

In particular, the Batumi port, which is located on the Black Sea coast of Georgia and is owned by KazTransOil JSC, can lose part of the current supply from Kazakhstan in addition to the delays in the supply of additional volume of raw materials from Tengiz and Kashagan fields on which it pins high hopes.

Tengiz field is waiting for the future expansion of capacity and can not increase its supply right now, while oil production hasn't started at Kashagan field yet. Under the conditions of shortage of export oil, loading of ports can become a real problem for Kazakhstan.

Kazakhstan Caspian Transportation System (KCTS)

Kazakhstan's KazMunaiGas national company signed a memorandum of understanding on Jan.24, 2007 on the project for creation of Kazakhstan Caspian oil transportation system that will allow to export oil from Kashagan and Tengiz fields to Europe through the Caspian Sea.

KCTS will include Eskene-Kuryk pipeline, a system of tanker deliveries from the post of Kuryk to Baku and further via the Baku-Tbilisi-Ceyhan pipeline.

The launch of the KCTS is made conditional on the launch of the second phase of Kashagan. The multi-transport KCTS should have an initial capacity of 23 million metric tons of oil per year.

Project status

Currently, there is no information about the start of implementation of this project, since after Sept.24, 2013, the operation of Kashagan field to which the KCTS project is linked, was suspended after detecting gas leaks from the onshore pipeline running from the D island to the Bolashak Integrated Oil and Gas plant.

After repairing the damaged junction, a hydrostatic test was conducted under the full control during which other potential leakage parts were also revealed and thorough investigation into the incident started.

Earlier, Deputy Energy Minister of Kazakhstan Magzum Mirzagaliyev said that it is expected to resume production at Kashagan field in H2 of 2016. Other sources believe that production at this field will start no earlier than 2018-2019, and consequently, KCTS will come on stream only by that period.