Trans-Caspian Oil Scheme Depends on Production Date

Plans to ship Kazak oil across the Caspian to reach export markets are not going to redraw the region’s energy supply map until the major Kashagan field comes on stream, according to NBCentralAsia’s energy analysts.



On January 24, Kaigeldy Kabyldin, the head of the state oil and gas firm KazMunaiGaz, announced that a memorandum of understanding had been signed on a trans-Caspian network which will take oil by tanker from the Kashagan field to Azerbaijan, where it will feed into the Baku-Tbilisi-Ceyhan pipeline and on to European markets.



The three billion US dollar project, which will involve laying a pipeline from Kashagan to the Kazak port of Kuryk, and a fleet of tankers with an initial capacity to transport 10 million tons a year across the Caspian, is being funded by oil firms involved in the KCO and TengizChevroil consortia, which are working the offshore Kashagan and onshore Tengiz fields, respectively.



The Tengiz deposit has proven reserves of 24 billion barrels, while Kashagan could become the largest Caspian field with reserves estimated at 38 to 51 billion barrels.



Analysts say the trans-Caspian project is directly dependent on Kashagan’s oil, so its fate will become clear only once commercial extraction starts at the field. The start of production has been delayed three times because of technical difficulties.



“It isn’t clear when commercial extraction will begin at Kashagan, and without that, the [transport] project cannot be secure,” said NBCentralAsia energy expert Konstantin Syroyezhkin.



He noted that there are no firm indications when trans-Caspian shipping would start, although a tentative date of 2010 or 2011 has been mentioned. That is because the start of Kashagan production might be put back to 2010 or later.



Yaroslav Razumov, another NBCentralAsia energy expert, made the point that the trans-Caspian transport project is also dependent on political factors, notably Russia’s current position on plans to increase the capacity on the Caspian Pipeline Consortium’s, CPC, pipeline, which takes Tengiz oil to the Russian port of Novorossiysk on the Black Sea. If Moscow ultimately rejects the threefold increase in capacity of the CPC pipeline which consortium members are pressing for, oil from western Kazakstan including Tengiz could be redirected to the trans-Caspian tanker route – bypassing Russia.



“On the one hand, the memorandum [on a trans-Caspian route] represents political pressure on Russia, an attempt to show it that alternative routes can be found,” said Razumov. “But at the same time, it does signify a real attempt to identify alternative transportation routes."



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