Kazakh oil and gas worries

The latest events in the Caucasus jeopardise many of Kazakhstan’s plans with respect to transportation of its strategic goods – oil and gas – by the southern route. The Caucasian corridor that Kazakhstan considered until recently, as an alternative transport route may prove the most unreliable.
Kazakhstan has signed an agreement with Azerbaijan to transport its crude to the world markets by the Baku-Tbilisi- Ceyhan oil pipeline (BTC). Long before the conflict broke out, when speaking about the transit potential of the Caucasus, Azerbaijan President Ilham Aliev said that the future of such major oil and gas project as the BTC would depend on stability in that region.
The first alarming news that the world media reported two weeks ago was a fire in the BTC. The pumping of crude from Baku was stopped. The Turkish media reported that a Kurdish terrorist organisation took the responsibility for the explosion on the BTC.
While the Azeri leader referred to Nagorno Karabakh when he raised the stability issue, the Georgia–A bkha - zia–Ossetia situation was no less worrisome. Georgian Economic Development Minister Ekaterina Sharashidze told a press-conference in Tbilisi that “We cannot disregard the attempts of the Russian aviation to bomb the oil and gas pipelines.”
Although the Kazakh crude is not yet transported by the BTC, many Kazakh experts predict that the latest developments will make the owners of crude think hard about using the other directions to transport their crude.
During a teleconference in Astana, Kazakhstan Prime Minister Karim Masimov directed the ministry of energy and mineral resources and the national oil and gas company KazMunaiGas (KMG) to consider re-orientation of exports of crude from the Caucasian corridor to the internal market. According to KazMunaiGas President Serik Burkitbaev, about one million tonnes of crude could be pulled out from the Caucasian corridor.
Commenting on the words of the KMG leader, a Kazakh oil expert told New Europe that “one million tonnes of crude is not big enough volume for us to regret.” However, such a situation is not good for Azerbaijan and Georgia who are going to lose profits from transit of crude through their territories, he said.
He also doubted that with the current high prices for crude, oil companies would be willing to send about one million tonnes of crude to the internal market. “If the northern direction, that is through Russia, is fully packed (the expansion of the Caspian Pipeline Consortium being on hold), these volumes are most likely to go either to China, or through Iran,” the expert concluded.
In spite of the distance, the Kazakh oil companies have been seriously concerned over the events in Northern Ossetia and Georgia. As is known, last year the national company KazMunaiGas became the 100 percent owner of the Batumi port on the Black Sea. The information agencies have reported bombing damages to another Georgian port on the Black Sea, Poti.
At a government meeting, Burkitbaev said that although the Batumi port did not suffer as a result of the situation at the Caucasus, the concerns were still there. The Batumi port did not suffer like the Poti port did. But we have removed all the bulk carriers and tankers that were in the loading area. However, the concerns are still there.
As New Europe wrote earlier, with the purchase of the terminal in Batumi, Kazakhstan had plans to transport its crude through it and through the Azeri-Georgian oil pipeline Baku-Supsa, to a refinery in the Romanian port of Constanca. As the 75 percent owner of the oil concern Rompetrol, the Kazakh national company nurtured ambitious plans to enter the European market. Now, in the light of the situation in Georgia, these plans are also under a threat of frustration.
“Kazakhstan can still deliver its crude to Romania by the Russian oil pipeline Atyrau–Samara. However, we are not losing hope that by the time of the big Kazakh oil, the situation in the Caucuses, in particular, in Georgia, will normalise,” the Kazakh oil expert told New Europe.