Kazakhstan Upgrades Legacy Pipeline to Russia to Grow Oil Supplies to Germany

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Kazakhstan pursues historic opportunity to become energy supplier to Europe’s most influential nation despite having to transit Russia

Kazakhstan state-controlled oil pipeline operator Kaztransoil has completed a key upgrade at a legacy export pipeline link to the Russian oil transmission network, as the country is ready to accept increased transit risks to deliver its oil via Russia to Germany.

Russia and its corporations have been extensively sanctioned in response to Moscow’s invasion of Ukraine last year; with possible restrictions against those states in the former Soviet Union area that help Moscow to circumvent the sanctions also under discussion.

Kaztransoil said it had replaced the final 45-kilometre section of the 1200-kilometre pipeline link, known as Atyrau–Samara, laying new pipes and also building a new metering station to measure the flow of Kazakh oil just before it enters the Russian pipeline network.

The importance of the connection, that was built in the Soviet Union, this year has suddenly grown for Kazakhstan after Europe introduced a ban on Russian oil imports to the European continent.

The ban had led to the halt of Russian oil pipeline exports to Poland and Germany via the northern leg of the Friendship pipeline, also known as Druzhba, before the end of the first quarter of this year.

However, Kazakhstan has agreed for its oil to flow across Russia, Belarus and Poland to Germany after it enters the Russian network from the Atyrau–Samara link.

According to Nurlan Zhumagulov, managing director of Kazakh energy industry social network channel Energy Monitor, between February and July the country delivered an estimated 2.9 million barrels of its oil to Germany, compared to zero such volumes in 2022.

Zhumagulov expects Kazakhstan’s oil exports to Germany to gradually increase before the end of 2023, with close to 3.7 million barrels of Kazakh oil scheduled to flow to Germany via Russia.

This oil is planned to be supplied by the country’s third-largest producing project, Karachaganak, in the northwest of Kazakhstan.

The route to Germany has also been made attractive by a reduced tariff, estimated at just $4.1 per barrel that Kazakh producers will have to pay for their oil to be transported via Russia and Belarus to the point where it enters Poland.

According to Kaztransoil, Kazakh producers are already using the Atyrau–Samara connection to ship their output to the Russian ports of Ust-Luga on the Baltic Sea and Novorossiysk on the Black Sea.

Referring to the earlier drone attacks against the Russian fleet near Novorossiysk, Kaztransoil deputy director Erik Sagiyev during the company’s recent investor day on the Kazakh Stock Exchange said: “As for Novorossiysk, we are exploring options. If the Black Sea situation deteriorates, Kazakh oil volumes may be redirected to the Ust-Luga port [from Novorossiysk].”

Kaztransoil said that last year Kazakh producers shipped more than 69 million barrels of their own output via the Atyrau–Samara link, reversing the declining trend seen before 2022, with the volume only exceeded by the country’s premier export route, operated by Caspian Pipeline Consortium, which delivers output from the Tengiz, Kashagan and Karachaganak developments.

Source : Upstream