Loadings of Kazakh CPC crude halted at Novorossiisk as alternative routes sought

Kazakhstan said March 23 it was looking to export its CPC Blend crude oil via alternative routes after storm damage brought loadings of the crude at the Russian port of Novorossiisk to a complete halt.

The CPC pipeline consortium confirmed it had stopped loadings from the port in the northeast of the Black Sea and warned repairs could be hampered by a refusal of some parts suppliers to transact with the consortium.

Russian Deputy Prime Minister Alexander Novak meanwhile underlined the stoppage could seriously impact global markets in the context of sanctions against Russia's own oil exports, in a speech in Moscow.

Landlocked Kazakhstan relies on pipeline exports via Novorossiisk for the bulk of its crude exports and had already faced difficulties from security risks in the Black Sea resulting from the war in Ukraine, and sanctions against Russia.

CPC crude exports exceeded 1.5 million b/d in February, more than 90% of this from Kazakh fields in the Caspian region. The light, relatively sweet crude is distinct in quality from Russian mainstay Urals and often trades at a premium to Urals. The US Treasury has said CPC crude is exempt from sanctions against Russia given most of the crude is from Kazakh fields.

On March 22 the operator of the CPC pipeline from Kazakhstan said two of the three offshore loading facilities at Novorossiisk had suffered storm damage and repairs could be hampered by unavailability of parts as well as weather conditions. The third facility has still to be examined for damage, but has been shut in the meantime, the operator said.

In a statement, Kazakhstan's energy ministry said: "Currently, the energy ministry is consulting with CPC on the timeframe for renewing operation of the sea terminal. Meanwhile the potential is being examined for an increase in shipments of crude for export via alternative routes."

CPC director general Nikolai Gorban said in a statement March 23 that he foresaw difficulties repairing the damaged facilities, apparently referring to moves by Western companies to shun Russia. He named a number of suppliers, saying "these foreign suppliers, which delivered to us up to now, have officially informed us that they are refusing to cooperate further and there will be no further deliveries. We have a normal stock of supplies but they are insufficient if such events develop."

He added that pumping of crude from Kazakhstan through the pipeline to Novorossiisk continued at a reduced level for the time being, but there was storage capacity at the port sufficient only until the end of March 24.

Chevron, the lead investor in Kazakhstan's highest-producing field Tengiz, said in an emailed comment it was "assessing the situation."

The Tengiz operating consortium is currently completing a $45 billion expansion project intended to lift crude output to 850,000 b/d.

Alternative routes

BP has said there is capacity in Azerbaijan's Baku-Tbilisi-Ceyhan pipeline that can be used for shipping Kazakh crude along the route to Turkey's Mediterranean coast; however, shipping crude across the Caspian for loading into the BTC pipeline is seen as logistically arduous.

Kazakhstan also has land-based alternatives for shipping its crude: oil can be shipped via Russia's Transneft network, and a 2,200 km pipeline runs from the Caspian Sea to China's western border. However, both routes are likely to entail significant impairments to pricing of CPC Blend.