Kazakhstan eyes rapid restoration of CPC crude loadings after disruption

Kazakh officials anticipate loadings of the country's CPC Blend crude oil returning to normal shortly following an outage at the Russian port of Novorossiisk that has lasted almost a month, according to sources in the Central Asian state.

The resumption, expected as soon as the end of the current week according to one report, would help boost supply in the Mediterranean region following disruption also to Libyan loadings resulting from political unrest, as well as reductions in Russian crude purchases due to the Ukraine invasion.

However, the operator of the CPC loading facilities declined to confirm expectations of an imminent restart, noting "unfavorable" weather conditions in the area for repair work.

Loadings of CPC Blend derived mainly from fields in Kazakhstan such as Tengiz and Kashagan were completely halted on March 23 following the discovery of storm damage to offshore loading facilities, and resumed from just one of the three 'single-point mooring' (SPM) systems on March 28, leading Kazakh upstream producers to moderate production rates.

Prior to the damage, loadings of CPC Blend, including a small portion of Russian crude, averaged over 1.5 million b/d in February.

CPC Blend, though loaded from Russia, is not formally subject to sanctions imposed by the US and others in response to the invasion of Ukraine. However, the blend has taken an indirect hit from the conflict, being steeply discounted in price due to reluctance among buyers and shippers to load in Russia, and Black Sea security risks.

On April 20, the news service of Kazakh President Kassym-Jomart Tokayev said he had discussed the situation with the CEO of state oil company KazMunaiGaz, Magzum Mirzagaliyev, and the head of state "was informed about the imminent completion of repairs to the SPM, which will enable a resumption of previous levels of Kazakh crude transportation via the CPC pipeline," the news service said.

Separately, Russia's Tass news agency quoted energy minister Bolat Akchulakov as saying loading volumes should be fully resumed "by the end of this week," using two out of the three loading facilities, which would be sufficient for normal loading volumes. "In principle we've always had two SPMs in operation with one in reserve, so two is sufficient for 100% capacity," Akchulakov was quoted as saying.

Operator cautious

However, the Moscow-based CPC pipeline operator, which also operates the loading facilities, remained reticent.

"In order to ensure reliable and accurate provision of information CPC will comment on the progress of repair work to the SPM facilities upon completion, and not with announcements that can be subject to change, including due to weather conditions," a spokesperson for the consortium told S&P Global Commodity Insights, adding that currently in the port wind speeds were up to 17 meters/second, or 38 miles/hour, and wave heights up to 1.5 meters, with conditions forecast to improve.

CPC Blend was most recently assessed at a discount to Dated Brent close to $9/b on a CIF basis and over $12/b on a FOB basis, S&P Global data showed, however, this compares with a near-$35/b discount for Russia's Urals loaded on a CIF August basis.

Supply to the Mediterranean has been supplemented from outside sources such as West Africa, according to reports.

The minister, Akchulakov, has previously said Kazakhstan had the ability to export some 16.5 million mt via other routes on an annual basis, or roughly 360,000 b/d, including via the Caspian Sea through Azerbaijan and via pipelines into China and Russia, however, the extent to which these options are being used was unclear.

Kazakhstan's energy ministry did not respond when approached for comment.