Tokayev Looks to Caspian to Diversify Oil Export Routes

asian crossroads | Economy | Central Asia

Kazakhstan is again eyeing the potential of a Trans-Caspian pipeline, but are plans to diversify oil export routes just hooking the Kazakh economy to a doomed fossil fuel industry?

Kazakh President Kassym-Jomart Tokayev described the diversification of oil export routes, in particular the Trans-Caspian option, as a “priority” in a government meeting on July 7. Although Tokayev did not mention Russia directly, the comments came days after a Russian court ordered a suspension of operations in Novorossiysk, the Russian port that handles most of Kazakhstan’s oil exports.

Although CPC filed an appeal, which reportedly delayed the suspension of operations, the incident follows a series of outages in Novorossiysk in the past year, illustrating the vulnerability of Kazakhstan’s most lucrative industry to disruptions.

What Paolo Sorbello explained earlier this year“Now, [CPC] it transports two-thirds of Kazakhstan’s oil exports. That’s about 40 percent of Kazakhstan’s total exports.” It is a major liability for such a critical sector to rely on a foreign bottleneck. Of spills a stormsthere are many risks that can disrupt operations before taking into account the influence of politics, often with consequences, but more difficult to measure.

Diversification would seem to be the obvious solution, but equally obvious are the difficulties in achieving it. As a landlocked country, Kazakhstan relies on the territory of other countries for its oil to reach world markets, no matter which way the oil flows. In addition to CPC, which transports oil from Kazakhstan’s Atyrau province through southern Russia, Kazakhstan can transport oil through the Uzen-Atyrawi Samara Pipeline to Russia and from there via the Russian pipeline network to the Baltic terminal at Ust-Luga or Novorossiysk on the Black Sea. Then there is the network of oil pipelines between Kazakhstan and China. Kazakhstan also boats oil by rail and by tankers through the Caspian, but in much smaller volumes.

Trans-Caspian routes for both oil and gas have been pondered for a long time, but none have yet been realized.

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Tokayev’s call for a rapid diversification of export routes is “an unrealistic goal to be achieved in the short term,” Luca Anceschi, Senior Lecturer in Central Asian Studies at the University of Glasgow, told The Diplomat. “[P]Ipelines are expensive energy infrastructures that, to be built and brought online, require long rounds of negotiation with transit partners and, more importantly, with buyers.”

Tokayev’s insistence that the “priority direction” for oil diversification is the Trans-Caspian route resurrects the efforts of his predecessor, Nursultan Nazarbayev, to transport more oil across the Caspian Sea to Azerbaijan and then to Europe. In 2006Kazakhstan and Azerbaijan signed a framework agreement on an oil transport system across the Caspian, though that left open the details of whether the envisioned system would include a deep-sea pipeline or increased tanker transport. for 2009the state-owned energy companies of both countries agreed to carry out further feasibility studies and during a visit by Nazarbayev to Francethe then Kazakh president announced the “participation of the French team in the project to build the main export pipeline from the Caspian Sea to Baku and Europe”.

More than a decade later, there is still no pipeline across the Caspian. It is unclear whether Tokayev’s recent emphasis on diversifying oil export routes can really move the process forward, but arguably unlikely.

More importantly, the diversification of oil export routes only drives Kazakhstan’s economy further into an industry that many see as inevitably doomed, as climate change motivates an expected global shift away from fuels. fossils.

“The regime’s obstinacy in keeping the entire economic structure dependent on the energy sector will one day collide with the reality of the post-oil world,” Anceschi warns. “At that time, it is reasonable to expect a dramatic economic crisis to break out: the leaders of a New Kazakhstan should prepare to mitigate the risks associated with such a scenario, since a post-rent economy is not only more stable but also… and perhaps more Crucially, given the socio-economic grievances that continue to emerge from Kazakh society, a fairer economy.”

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