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Kazaks Opt for Bulgarian Pipeline

By News Briefing Central Asia
Kazakstan is planning to join a Russian-led pipeline project, a move NBCentralAsia observers say will make it more competitive on the world energy market while staying close to Moscow.

Baktykoja Izmukhambetov, Kazakstan’s minister of energy and mineral resources, has announced that his government wants to acquire a share in the Burgas-Alexandroupolis oil pipeline project, which would carry around 35 million tons of oil a year to Europe. The route would go from Burgas on Bulgaria’s Black Sea coast and to the Greek port of Alexandroupolis, providing an outlet to the Mediterranean without the need for tankers traversing the crowded Bosphorus Straits.

Izmukhambetov said Kazakstan would be holding talks with Greece and Bulgaria to negotiate the purchase of part of the 49 per cent share package held by these two countries. Russian companies own the rest of the stock in the pipeline project and are not interested in selling any of it.

NBCentralAsia analysts note that the latest announcement came shortly after President Nursultan Nazarbaev rejected the offer of a share in a rival pipeline project, which would go from the Black Sea port of Odessa to Brody, both in Ukraine, and eventually on to Poland. Russia has no part in that project.

“Both economic interest and political motives are at work here,” commented Askar Nursha, head of foreign policy studies at the Kazakstan Institute for Strategic Studies. “Kazak participation in the Burgas-Alexandroupolis pipeline fits in with Russia’s geopolitical interests in the region. In particular, it is a serious blow to United States plans to get Kazak oil out without going through Russia.”

Nursha says all countries involved in the Burgas-Alexandroupolis project are pleased that Kazakstan are on board, since it has the production potential to allow full use to be made of the pipeline’s anticipated maximum capacity of 50 million tons a year.

Kazakstan plans to double its total annual oil exports to 120 million tons by 2015.

Political scientist Dosym Satpaev says Kazakstan has agreed to join the Burgas-Alexandroupolis pipeline for political rather than economic reasons. The government, he says, is having to navigate its way through an increasingly complex environment in which Russia and Kazakstan are rivals on the energy market.

“Kazakstan and Russia are becoming competitors in the oil and gas market, and I think Nazarbaev has realised that if this competition grows to acute, it could have an impact on political relations between the two countries,” said Satpaev.

Analysts say now that Kazakstan is involved in the new pipeline, the question of increasing capacity on the Caspian Pipeline Consortium, CPC, route will rise up the agenda.

The CPC pipeline runs from the Tengiz field in western Kazakstan to the Russian Black Sea port of Novorossiysk, from where it could be taken by tanker to Burgas. The United States oil firm Chevron has been pressing for CPC, in which it has a 15 per cent stake, to double the capacity of its pipeline to 67 million tons per year.

Such an increase in capacity has so far been opposed by the Russian pipeline operator Transneft, a competitor of CPC. But analysts have suggested that Moscow – which has a 24 per cent stake in CPC – might back the request if it means the oil can be directed to the Burgas-Alexandropoulis pipeline. In so doing, Russia would prevent Tengiz oil going into the rival Baku-Tbilisi-Ceyhan pipeline, which is backed by the United States.

If this happens, Nursha said, “Kazakstan will be able to combine involvement in the Burgas-Alexandroupolis project with the prospect of expanding CPC’s capacity."

(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)