Kazakhstan Sends Second Oil Shipment Across the Caspian Sea to Baku
Author: Haley Nelson
Mar 29, 2023
After receiving its first batch, Kazakhstan’s state-owned oil pipeline operator, KazTransOil, announced the second oil shipment through the Aktau port from the Tengiz oil field. Kazakhstan has undertaken efforts to diversify oil and gas export routes considering the complex geopolitical situation that has arisen since the Russia invasion of Ukraine in February of 2022. After shipping the first batch of oil from the Kashagan offshore field on March 20, this marks the second official shipment of Kazakh oil to the Sangachal terminal in Azerbaijan. However, while the increased use of the Middle Corridor offers benefits to Kazakhstan and its Western consumers, capacities at Kazakhstan’s port Aktau and at Sangachal are not yet sufficient to provide a viable alternative to Kazakhstan's traditional export routes.
On March 27, KazTransOil released a statement detailing the successful shipment of 9.959 tons of oil from Kazakhstan’s Tengiz oil field, across the Caspian Sea’s Middle Corridor route via the ‘Shusha’ tanker, to the Sangachal terminal 42 km South of Baku. From there, it can access the Baku-Tbilisi-Ceyhan pipeline to reach the Ceyhan Mediterranean terminal and enter global markets. According to the official statement, by the end of March 2023, KazTransOil will ship an additional 10,000 tons of Tengiz oil through this route, and by the end of April, this will increase to 125,000 tons of oil, approximately 932,500 barrels. Transportation of Kazakh oil to Azerbaijan is laid out within the framework of an agreement between SOCAR and KazMunayGas to deliver 1.5 million tons of oil per year via the Caspian Sea Middle Corridor route. Although tanker fleets are currently at limited capacity, by the end of 2023, this agreement will allow for 12-14 tanker trips monthly. With access to Kashagan oil and Tengiz oil, the Aktau port is quickly becoming an alternative option for Kazakhstan’s oil exports, and with rising interest in Caspian energy resources, alternative export routes can lead to a more stable energy market in Kazakhstan.
This comes after operators announced a drastic increase in Tengiz oil outputs. In early March 2023, during the CERAWeek conference in Houston, Chevron announced its plans to increase oil production in Kazakhstan to one million barrels per day. As it currently stands, Chevron, which holds a 50% interest in Tengizchevroil (TCO), produces around 700,000 barrels per day in Kazakhstan. With a backdrop of the war in Ukraine and the emerging potential of the Caspian region as an alternative to Russian producers, Chevron, and its shareholder counterparts, see this field as part of the solution to the recent energy crisis and have urged immediate logistical upgrades since. In late January 2023, Chevron announced that its sour gas injection facility at the Tengiz field was in its early commissioning stage, and its fuel gas system was tied into its first gas turbine generator. Under Chevron’s Wellhead Pressure Management Project (WPMP) and Future Growth Project (FGP), the Tengiz field is expected to undergo expansion and conversion of the field operations from “high to low pressure,” reaching its potential “by 2025.” However, as TengizChevroil currently sends almost all its crude oil through the Caspian Pipeline Consortium, moving across Russian territory, many have warned that it’s leaving itself vulnerable to Russian retaliation. But, with the exploration of alternative routes, which avoid Russian territory, the Tengiz oil field has been granted additional export opportunities, albeit at limited capacity.
As for the Aktau port capacity, in October 2022, Deputy Head of the Transport Committee of the Kazakh Industry and Infrastructure Development Ministry Kassym Tilepov, announced that the port will greatly increase cargo traffic and container shipping. Under the ‘Sarzha’ project, the port will improve its capacity by nearly 500%, increasing cargo capacity from 40,000 TEU to 215,000 TEU per year. As Aktau is Kazakhstan’s largest Caspian Sea shipping port, Kazakhstan’s “task is to adapt to ensure logistics in a new economic reality,” according to Tilepov. With additional coordination from UAE-based Abu Dhabi Ports Group, the port should soon see upgrades to its fleets and facilities. However, these improvements take time and financing to develop, and for the foreseeable future, the trans-Caspian will remain a viable but less profitable and lower volume alternative to the Russia-crossing routes.
The rapid traffic growth has exposed bottlenecks caused by insufficient tanker capacity and seaport infrastructure in Kazakhstan and Azerbaijan. These issues need immediate attention. Kazakhstan’s ambitious oil export targets across the Caspian Sea must coincide with great efforts to improve logistics, or else it risks deterring future shipments.