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Caspian pipelines ease Russia's grip
By Robert M Cutler
Asia Times Online Holdings
Jul 8, 2008
MONTREAL - New prospects for a Trans-Caspian Gas Pipeline (TCGP) from
Turkmenistan to Azerbaijan have been receiving deserved attention
in recent months. However, another project to pipe energy resources
from the western to the eastern shore of the Caspian Sea also demands
attention, with implications that loom as large as those of the TCGP.
This is an overland oil pipeline that Kazakhstan intends to build
from the Tengiz field, in the northwest of the country, to the port
of Aqtau in the southwest.
The country's national oil and gas company, KazMunaiGaz, the Agip
KCO consortium developing the offshore Kashagan deposit and the
TengizChevrOil joint venture agreed after long discussions to a first
memorandum of understanding in January 2007. Before that, an earlier
variant would have seen the oil transshipped to
[lg.php?bannerid=67&campaignid=47&zone id=36&loc=http%3A%2F%2Fwww.atimes.com%
2Fatime s%2FCentral_Asia%2FJG08Ag01.html&referer=http% 3A%2F%2Fnews.google.com
%2Fnews%3Fhl%3Den%26tab%3D wn%26ned%3Dus%26ie%3DISO-8859-1%26q%3Dblack+sea&am p;cb
=831ceb5fd1] Mahachkala, Dagestan, in the Russian Federation, for
the pipeline ending at Novorossiisk on the Black Sea. This appears
to be no longer under consideration.
At present, about four-fifths of Kazakhstan's oil has nowhere to go
but through Russia's pipeline system. Half of the rest is exported
through the Georgian Black Sea port of Batumi, the seaside capital
of the formerly rebellious Georgian province of Ajaria. The other
half of the rest goes to China, which wishes to quadruple its oil
imports from Kazakhstan from 100,000 to 400,000 barrels per day (bpd)
by the end of the decade, although Kazakhstan, perhaps because of
its experience with Russia, is hesitating at the prospect.
So Kazakhstan is now engaged in constructing a 730 kilometer, 500,000
bpd pipeline from Eskene, in the west, to the port of Kuryk, near
Aqtau. The volume is to be increased in subsequent stages to between
750,000 and 1.2 million bpd. This pipeline, provisionally estimated to
cost US$3 billion, will be the main section of a projected Kazakhstan
Caspian Transportation System (KCTS).
Kazakhstan intends by using the KCTS to decrease its dependence
upon the pipeline of the Caspian Pipeline Consortium (CPC), which
after crossing the border runs entirely within southern Russia to
Novorossiisk on the Black Sea. Original commitments by Russia to
expand CPC pipeline volume have not been realized, despite public
promises made in joint press conferences by Vladimir Putin, when
he was president, standing next to Kazakhstan's President Nursultan
Nazarbaev in Astana.
A new export terminal was opened this May at Kulevi, on the Georgian
Black See coast near Poti, where the Baku-Supsa pipeline for "early
oil" from Azerbaijan ran in the 1990s up until last year, when it
closed for refurbishing. Kulevi, which can also receive oil delivered
by railcar, will begin by handling about 100,000 bpd of new oil from
Azerbaijan. That capacity can be doubled by the end of the decade,
and then conceivably doubled again as necessary to handle oil from
Kazakhstan.
Potential export terminals on Georgia's Black Sea coast include
the now-refurbished port at Batumi. From any or all of these ports,
tankers may take Azerbaijani and/or Kazakhstani oil to Odessa over
the Black Sea for insertion into the Odessa-Brody pipeline (OBP). It
had originally been intended to run the OBP from east to west with
Kazakhstani oil, but Russia did not allow this: it now carries Russian
oil from west to east.
The Brody-Plock spur was not judged economically feasible earlier
in the decade. Price rises for petroleum products have since changed
that. From Brody Kazakhstan's oil could continue through a pipeline
long under consideration but never yet built, to Plock, whence an
existing pipeline extends to the port of Gdansk.
It is not clear yet whether the oil itself will come from Tengiz or
from the offshore Kashagan deposit. First production from the latter
has now been pushed back to 2010-2011, about the time the new pipeline
should enter into service. Yet despite Kazakhstan's consternation
over the delay, there are very real technical and geophysical issues
that make tapping the Kashagan deposit extremely sensitive.
Basically, there is a large dome of natural gas overlaying a huge
deposit of crude petroleum, all housed under extreme pressure under an
immense salt dome. Kazakhstani law does not permit the gas to be flared
or otherwise to escape; rather, it must be recaptured for domestic
use. The gas could also be exported southwards towards Turkmenistan,
where it could join gas from Ashgabat in an undersea trans-Caspian
link to Azerbaijan, eventually entering feeder pipelines to Europe
without having to pass through the Russian system. Discussions between
Turkmenistan and Azerbaijan to realize the bilateral project are
reportedly well under way.
For many years, Russia used promises and cajoling to discourage
Kazakhstan from signing a trans-Caspian agreement. It was also planned
to more than double the volume of the CPC pipeline from 615,000 to
nearly 1.3 million bpd. The failure to accomplish this is due partly
to internal Russian bureaucratic and inter-regional squabbling and
partly to the inability or unwillingness of the Russian presidency
to overcome those disagreements. Regardless of the reason, the result
is the same for Kazakhstan.
Recently, Gazprom offered to buy natural gas from Azerbaijan at market
prices. Azerbaijan must feel the same way Kazakhstan does about Russia
in this respect, because the offer was refused. Events - and not least
the rise in the price of oil making more possibilities economically
feasible - have begun to accelerate the overtaking of Russia's
near-monopoly on transport of Caspian Sea basin energy resources.
By Robert M Cutler
Asia Times Online Holdings
Jul 8, 2008
MONTREAL - New prospects for a Trans-Caspian Gas Pipeline (TCGP) from
Turkmenistan to Azerbaijan have been receiving deserved attention
in recent months. However, another project to pipe energy resources
from the western to the eastern shore of the Caspian Sea also demands
attention, with implications that loom as large as those of the TCGP.
This is an overland oil pipeline that Kazakhstan intends to build
from the Tengiz field, in the northwest of the country, to the port
of Aqtau in the southwest.
The country's national oil and gas company, KazMunaiGaz, the Agip
KCO consortium developing the offshore Kashagan deposit and the
TengizChevrOil joint venture agreed after long discussions to a first
memorandum of understanding in January 2007. Before that, an earlier
variant would have seen the oil transshipped to
[lg.php?bannerid=67&campaignid=47&zone id=36&loc=http%3A%2F%2Fwww.atimes.com%
2Fatime s%2FCentral_Asia%2FJG08Ag01.html&referer=http% 3A%2F%2Fnews.google.com
%2Fnews%3Fhl%3Den%26tab%3D wn%26ned%3Dus%26ie%3DISO-8859-1%26q%3Dblack+sea&am p;cb
=831ceb5fd1] Mahachkala, Dagestan, in the Russian Federation, for
the pipeline ending at Novorossiisk on the Black Sea. This appears
to be no longer under consideration.
At present, about four-fifths of Kazakhstan's oil has nowhere to go
but through Russia's pipeline system. Half of the rest is exported
through the Georgian Black Sea port of Batumi, the seaside capital
of the formerly rebellious Georgian province of Ajaria. The other
half of the rest goes to China, which wishes to quadruple its oil
imports from Kazakhstan from 100,000 to 400,000 barrels per day (bpd)
by the end of the decade, although Kazakhstan, perhaps because of
its experience with Russia, is hesitating at the prospect.
So Kazakhstan is now engaged in constructing a 730 kilometer, 500,000
bpd pipeline from Eskene, in the west, to the port of Kuryk, near
Aqtau. The volume is to be increased in subsequent stages to between
750,000 and 1.2 million bpd. This pipeline, provisionally estimated to
cost US$3 billion, will be the main section of a projected Kazakhstan
Caspian Transportation System (KCTS).
Kazakhstan intends by using the KCTS to decrease its dependence
upon the pipeline of the Caspian Pipeline Consortium (CPC), which
after crossing the border runs entirely within southern Russia to
Novorossiisk on the Black Sea. Original commitments by Russia to
expand CPC pipeline volume have not been realized, despite public
promises made in joint press conferences by Vladimir Putin, when
he was president, standing next to Kazakhstan's President Nursultan
Nazarbaev in Astana.
A new export terminal was opened this May at Kulevi, on the Georgian
Black See coast near Poti, where the Baku-Supsa pipeline for "early
oil" from Azerbaijan ran in the 1990s up until last year, when it
closed for refurbishing. Kulevi, which can also receive oil delivered
by railcar, will begin by handling about 100,000 bpd of new oil from
Azerbaijan. That capacity can be doubled by the end of the decade,
and then conceivably doubled again as necessary to handle oil from
Kazakhstan.
Potential export terminals on Georgia's Black Sea coast include
the now-refurbished port at Batumi. From any or all of these ports,
tankers may take Azerbaijani and/or Kazakhstani oil to Odessa over
the Black Sea for insertion into the Odessa-Brody pipeline (OBP). It
had originally been intended to run the OBP from east to west with
Kazakhstani oil, but Russia did not allow this: it now carries Russian
oil from west to east.
The Brody-Plock spur was not judged economically feasible earlier
in the decade. Price rises for petroleum products have since changed
that. From Brody Kazakhstan's oil could continue through a pipeline
long under consideration but never yet built, to Plock, whence an
existing pipeline extends to the port of Gdansk.
It is not clear yet whether the oil itself will come from Tengiz or
from the offshore Kashagan deposit. First production from the latter
has now been pushed back to 2010-2011, about the time the new pipeline
should enter into service. Yet despite Kazakhstan's consternation
over the delay, there are very real technical and geophysical issues
that make tapping the Kashagan deposit extremely sensitive.
Basically, there is a large dome of natural gas overlaying a huge
deposit of crude petroleum, all housed under extreme pressure under an
immense salt dome. Kazakhstani law does not permit the gas to be flared
or otherwise to escape; rather, it must be recaptured for domestic
use. The gas could also be exported southwards towards Turkmenistan,
where it could join gas from Ashgabat in an undersea trans-Caspian
link to Azerbaijan, eventually entering feeder pipelines to Europe
without having to pass through the Russian system. Discussions between
Turkmenistan and Azerbaijan to realize the bilateral project are
reportedly well under way.
For many years, Russia used promises and cajoling to discourage
Kazakhstan from signing a trans-Caspian agreement. It was also planned
to more than double the volume of the CPC pipeline from 615,000 to
nearly 1.3 million bpd. The failure to accomplish this is due partly
to internal Russian bureaucratic and inter-regional squabbling and
partly to the inability or unwillingness of the Russian presidency
to overcome those disagreements. Regardless of the reason, the result
is the same for Kazakhstan.
Recently, Gazprom offered to buy natural gas from Azerbaijan at market
prices. Azerbaijan must feel the same way Kazakhstan does about Russia
in this respect, because the offer was refused. Events - and not least
the rise in the price of oil making more possibilities economically
feasible - have begun to accelerate the overtaking of Russia's
near-monopoly on transport of Caspian Sea basin energy resources.