Why Kazakh oil sector suffers as Ukraine strikes Russia | EUROtoday

Ukraine’s drone strikes on Russian vitality infrastructure have considerably hit Moscow’s export operations in latest months, however they’re additionally impacting different nations, notablyKazakhstan.

In late November, Ukrainian drone strikes knocked out one of many three important tanker loading amenities on the Black Sea port of Novorossiysk in Russia

It’s at that export terminal the place the Caspian Pipeline Consortium (CPC) oil pipeline finally ends up, carrying crude oil all the way in which from Kazakhstan’s large Tengiz oil subject greater than 1,600 kilometers (994 miles) away.

On Tuesday (January 13), information company Reuters reported that three Greek-managed oil tankers have been hit by unidentified drones within the Black Sea as they have been on their solution to load crude on the Novorossiysk terminal.

It was not instantly clear who was behind Tuesday’s strikes, Reuters mentioned, as a result of Ukraine didn’t instantly remark and terminal operator CPC declined to touch upon the assault.

Oil and fuel condensate output in Kazakhstan plunged by 35% between January 1 and January 12 in comparison with December’s common, a supply acquainted with the information instructed Reuters, including that the drop was primarily on account of export constraints through the Black Sea terminal.

Kazakhstan’s vitality ministry mentioned on Tuesday that CPC was persevering with to export oil through one mooring.

While Ukraine’s president, Volodymyr Zelenskyy, has described drone assaults on Russian vitality infrastructure as “the sanctions that work the fastest,” the November assault on the CPC terminal prompted a pointy rebuke from Kazakhstan.

“We view what has occurred as an action harming the bilateral relations of the Republic of Kazakhstan and Ukraine, and we expect the Ukrainian side to take effective measures to prevent similar incidents in the future,” a press release from Kazakhstan’s Ministry of Foreign Affairs mentioned.

Oil exports important for Kazakh economic system

The blunt response from the Kazakh authorities displays how vital the CPC pipeline is to their whole economic system.

The pipeline brings the huge bulk of Kazakhstan’s crude oil exports to the worldwide market. Although most of its journey passes by means of Russian territory, it’s primarily an financial asset of Kazakhstan. Only about 15% of the oil it carried in 2024 was Russian oil.

The central Asian nation — which has a inhabitants of 20 million and is the ninth largest nation on this planet by space — has largely constructed its economic system round its oil sector.

Carole Nakhle, CEO of London, UK-based vitality consultancy Crystol Energy, says Kazakhstan is a key participant within the world oil market. “The Tengiz field, in particular, is one of the largest in the world and is a critical part of Kazakhstan’s oil output,” Nakhle instructed DW.

Being the world’s twelfth largest oil producer, Kazakhstan accounts for simply over 2% of worldwide provides. However, oil output from its Tengiz and Kashagan fields account for between 15% and 20% of the nation’s gross home product (GDP).

For three a long time, the Tengiz oil subject has confirmed to be one of many world’s most prolific oil fields, anchoring the Kazakh economic system since independence from the previous Soviet Union in 1991.

Kazakh oil has drawn billions of funding from US oil majors reminiscent of Chevron and Exxon Mobil.

Chevron simply accomplished an enormous $48 billion (€41 billion) growth of Tengiz as a part of a plan to dramatically ramp up manufacturing on the oil subject by about one third to 1 million barrels per day (bpd).

The flawed goal?

However, that plan has been hit — no less than within the quick time period — by the Ukrainian assaults. Exports from Tengiz are closely reliant on the Novorossiysk terminal, with few different choices out there.

“While Kazakhstan has sought to increase exports via alternative routes, the volumes remain limited,” Muyu Xu, from commodity knowledge supplier Kpler in Brussels, Belgium, instructed DW.

This harm to Kazakhstan’s export capability has drawn criticism of Ukraine’s ways.

After the drone assault in November, Sergey Vakulenko argued that it has had a far larger materials influence on Kazakhstan and Ukraine’s allies, moderately than Russia.

“For Ukrainian commanders tasked with reducing Russia’s oil export revenue, the CPC might appear to be just another part of Russia’s oil infrastructure,” the senior fellow on the Carnegie Russia Eurasia Center wrote in a press releaseincluding that a lot of the shareholders of the CPC have been, nonetheless, Western corporations, as a result of the pipeline is to “ensure that oil from landlocked Kazakhstan can reach global markets.”

Russia has already beforehand recognized how issues with the CPC could possibly be used strategically.

Moscow compelled a number of stoppages of the pipeline in 2022 to point that it may simply stop Kazakh oil reaching world markets. Further stoppages to the export of Kazakh oil would clearly not assist Ukraine, provided that it will probably make Russian oil extra engaging to buy.

Can Kazakhstan diversify its export routes?

Several consultants suppose the November assault has underlined the dangers to the Kazakh oil sector of dependence on Russian infrastructure and transit.

Carole Nakhle mentioned the assault had “further highlighted the weakness of relying on one route,” and underscorded the necessity to intensify Kazakh makes an attempt to export to Azerbaijan through the Baku-Tbilisi-Ceyhan pipeline and to China, through a smaller pipeline.

Currently the 2 choices would, nonetheless, provide solely restricted potential to exchange the large volumes the CPC, she added, that means that for now Kazakhstan would stay “highly dependent on Russian routes for the majority of its exports.”

Edited by: Uwe Hessler