Baku Energy Forum - Kashagan oil may go via Azerbaijan

Kashagan oil may go via Azerbaijan


Resource-rich Kazakhstan may start transportation of oil from its major Kashagan field through Azerbaijan, as Kazakh officials have raised the issue of realizing Kazakh Caspian Transportation System (KCTS) project.

A source in the Energy Ministry of Kazakhstan told Trend that the transit of Kazakh oil through the Aktau port via Azerbaijan in the future will mainly depend on its economic feasibility, noting that talks on the KCTS have not yet been launched.

Kazakhstan has previously transported its oil through the Baku-Tbilisi-Ceyhan pipeline, as well as by rail from Baku to the Black Sea ports of Georgia.

The results of the developed long-term balance of production and distribution of oil in Kazakhstan, revealed necessity for the KCTS project by the start of implementation of the Phase 2 of Kazakhstan’s Kashagan field development.

 The second phase is expected to take several years, the exact period, however, is not yet known. Currently, the phase is at the stage of the initial designing.

The KCTS is expected to consist of the Eskene-Kuryk oil pipeline in Kazakhstan and Trans-Caspian Oil Transport System, comprising an oil loading terminal in Kuryk port on the Kazakh coast of the Caspian Sea, tankers and other vessels, an oil discharge terminal on the Azerbaijani coast of the Caspian Sea, as well as facilities connecting it to the Baku-Tbilisi-Ceyhan pipeline.

The system will ensure the export of Kazakh oil to international markets mainly from the Kashagan field (second and third phase) via the Caspian Sea, through the Baku-Tbilisi-Ceyhan pipeline and other oil transportation systems both in Azerbaijan and other transit countries.

This oil transportation scheme was widely discussed between Kazakhstan and Azerbaijan in 2007 – 2008, but the project was later shelved due to uncertainties over Kashagan oil field production and the expansion of Tengiz field.

The capacity and stages of development of the KCTS will be determined based on the volume of oil production at the Kashagan field (phases 2 and 3).  It is planned to implement the project of the Trans-Caspian Oil Transport System, which is a part of the KCTS, on a parity basis (50/50) with Azerbaijan’s state oil company SOCAR in accordance with the terms of the previously signed contracts.

Azerbaijan’s Energy Minister Natig Aliyev earlier said Kazakhstan will be able to daily export 150,000 barrels of Kashagan oil through the Baku-Tbilisi-Ceyhan pipeline.

The Kashagan field, which earned the unfortunate nickname “cash-all-gone” due to a series of expensive overruns, finally started up in October 2016. The field, located in the north of the Caspian Sea is the biggest oil field opened in the last 40 years, while its recoverable oil reserves are assessed at 9-13 billion barrels.

Currently, Kashagan oil is exported via pipelines of the Caspian Pipeline Consortium and the Kazakh national company KazTransOil.

The country plans to produce 8.9 million tons of oil and 5.6 million tons of gas at this field in 2017 with gradual increase in output in subsequent years.

Kazakhstan's proven oil reserves as of early 2016 stood at 30 billion barrels, according to the BP Statistical Review of World Energy.