Kazakhstan assesses how to bypass CPC pipeline after Russia announces 'storm damage' shutdown

Kazakhstan assesses how to bypass CPC pipeline after Russia announces 'storm damage' shutdown
Russia claims storm damage has knocked out oil exports from the CPC. / Gazprom.
By bne IntelIiNews March 24, 2022

Kazakhstan's energy ministry said on March 23 that it was working on alternative oil export routes after the Caspian Pipeline Consortium (CPC) stopped operations to carry out repairs on what it said were two of three mooring points that Russia reported as damaged by a storm in its section of the Black Sea.

Repairs could take up to two months, RIA news agency quoted Russia's energy ministry as saying on March 22. Russian officials noted that Russian and Kazakh oil exports via the CPC from the Black Sea may fall by up to 1mn barrels per day (bpd), equivalent to 1% of global oil production.

The CPC pipeline has been in the spotlight since Russia's invasion of Ukraine and the subsequent imposing of restrictions by various countries on Russian oil exports that led to an oil price spike. Though the US hit Russian oil with sanctions, it did not sanction the CPC, saying that oil flows from Kazakhstan via Russia should continue to run uninterrupted. The capacity of the pipeline accounts for around two-thirds of Kazakhstan’s oil exports, making the infrastructure crucial for the country’s economy.

The Financial Times reported analysts as raising questions about the timing of the reported storm damage, as none of the pipeline’s western partners had been able to inspect the facilities. “If a storm shuts down infrastructure or if Russia shuts down infrastructure, Russia can decide when it reopens infrastructure,” Kevin Book, managing director at ClearView Energy Partners, a Washington-based research group, was quoted as saying.

The pipeline ships around 1.2mn barrels per day, or 1.2% of the global demand. Any major disruption to its flows would place further strain on a global oil market, which faces one of the worst supply crunches since the Arab oil embargo in the 1970s.

Most of the oil in the pipeline belongs to Russia, Kazakhstan and international oil majors, including Chevron. The oil is exported from Russia's Black Sea port of Novorossiysk.

The CPC pipeline runs 1,500km from the Tengiz oilfield in western Kazakhstan to Russia’s Black Sea coastline. It transits oil produced by US supermajors Chevron and ExxonMobil. Russian crude also feeds the line from oilfields along the route.

A Chevron spokesperson said the company was "currently assessing the situation."

Major global trading houses such as Vitol and Trafigura said on March 22 they estimated current Russian oil disruptions at 2mn-3mn barrels per day. They noted that the world could barely cope with a disruption exceeding 2mn bpd as it would lead to another price spike and an economic recession.