Kazakhstan's CPC crude exports uninterrupted as president orders push for alternative routes

Kazakhstan's exports of flagship crude grade CPC Blend continue uninterrupted, the country's energy ministry said July 7, as the operator of the grade's Russian loading facility challenged a suspension order by a district court and Kazakh President Kassym-Jomart Tokayev ordered a push to develop alternative routes.

The Kazakh ministry issued the reassurance after a court in the Russian port city of Novorossiisk that handles CPC loadings ordered a 30-day halt to operations in response to a request from Russia's transport inspectorate relating to a 2021 oil spill.

Initially July 6 the CPC consortium responded to the district court ruling by saying it would have to fulfil the shutdown order but issued a second statement saying it would appeal the ruling on the grounds that an abrupt shutdown risked damaging loading equipment.

A potential shutdown would be a major blow to landlocked Kazakhstan as the bulk of its crude oil exports are via the CPC pipeline across southern Russia to Novorossiisk, with CPC loadings reaching as high as 1.5 million b/d.

Most of the major global oil companies hold stakes in Kazakh upstream production, with several also holding stakes in the CPC pipeline.

"Currently, export of Kazakh crude via the CPC-Russia pipeline system is being carried out as normal," the Kazakh energy ministry statement -- carried by state news agency Kazinform -- said.

CPC Blend is not subject to sanctions relating to Russia's invasion of Ukraine as Kazakhstan is not party to the conflict, although a small portion of the crude derives from Russian fields in the Caspian Sea, typically around 10%.

Recent months have seen a series of disruptions to CPC loadings, including significant disruption from March to April attributed to storm damage.

Alternative routes

In the Kazakh capital Nur-Sultan, President Tokayev assembled top ministers and officials, ordering them to redouble efforts to strengthen transportation systems, including Caspian Sea shipping infrastructure, which he said could involve the Chevron-led Tengizchevroil consortium that operates the Tengiz field, the biggest contributor to CPC Blend.

Kazakhstan has long exported small quantities of crude across the Caspian Sea to Baku and on to the Mediterranean via the Baku-Tbilisi-Ceyhan pipeline to Turkey, however, the logistical constraints and expense involved are viewed as significant.

"The geopolitical situation and sanctions have led to the breakage of traditional transportation logistic chains," Tokayev said, quoted by his press service. "Kazakhstan has never been a maritime country and as a result hasn't fully realized its maritime potential, but now times have changed," he said. "The trans-Caspian route is a top priority. I'm instructing [state company] KazMunaiGaz to work out the best method for realizing this, including the possibility of attracting investors from the Tengiz project."

Tengizchevroil did not immediately respond to a request for comment. The operator of the third-highest contributor of CPC crude, the Karachaganak Petroleum Operating company, said it was "monitoring the situation" and in "continued dialogue with [Kazakh] authorities and CPC."

Russia tensions

In Moscow, the Kremlin has sought to play down tensions with Kazakhstan, which have been heightened in recent months by Tokayev resisting calls to recognize breakaway regions of Ukraine.

On July 6, Kremlin spokesperson Dmitry Peskov said Russia continued to view its southern neighbor as a friend, noting Kazakhstan had not joined in sanctions against Russia. The next day, July 7, Peskov played down notions of a political aspect to Kazakhstan's push for new export routes, according to the Tass news agency. "This is hardly politically motivated," Peskov said, adding that the environmental concerns behind the court order necessitated "additional contacts with our Kazakh partners."

CPC Blend, which is sought-after by petrochemicals producers due to its high naphtha content, was assessed at a $5.30/b discount to Dated Brent on July 6, S&P Global Commodity Insights data showed.