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Chevron says Kazakhstan's Black Sea shipments 'very important' amid Russian oil bans

Highlights

US company's CPC crude shipments certified of Kazakh origin

Industry seeks to maintain Kazakh shipments amid Russian boycotts

CPC crude remains discounted on Ukraine fallout, shipping risk

Kazakhstan's CPC crude oil exports, loaded from Russian territory and totaling some 1.5 million b/d, remain "very important" to world markets amid bans on Russian crude, the Central Asian country's top investor, Chevron, said March 21.

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In emailed comments, the California-based major said all its shipments of CPC crude from the Russian port of Novorossiisk were certified as being of Kazakh origin, and not Russian, amid boycotts of Russian oil by a number of countries in response to the invasion of Ukraine.

Landlocked Kazakhstan has close ties to Russia and relies on a pipeline across southern Russia for the bulk of its oil exports -- a major contributor to its economy -- but is not a party to the invasion of Ukraine.

Kazakh crude has been selling at a discount on the global market as buyers have shunned Black Sea shipments, partly due to the sanctions against Russia and partly due to elevated insurance costs relating to security risks in the Black Sea.

The US Treasury department has confirmed Kazakh crude, much of it produced with the help of foreign investors, is not subject to the sanctions against Russia. In March, Greenpeace protested against a delivery of CPC crude to ExxonMobil's Fawley refinery in the UK due to it being loaded at Novorossiisk.

With European Union countries now considering joining the US and UK bans, and fears growing around surging prices, Chevron, a major investor in Kazakhstan, said "the Caspian pipeline is a key export route for crude oil from Kazakhstan to reach international markets and many countries rely on this critical transportation system for their energy security."

"Given the current bans on Russian crude, access to Kazakh energy supplies remains very important for consumers around the world," Chevron added.

So far, there has been little sign of an impact on the volume of Kazakh crude being shipped from Novorossiisk, with total CPC loadings amounting to over 1.5 million b/d in February and April loadings set to be at similar levels, according to a copy of the loading program seen by S&P Global Commodity Insights.

Typically, a small amount of CPC crude -- 10% or less -- is derived from Russian fields in the far north of the Caspian Sea.

Production 'uninterrupted'

Chevron -- the largest shareholder in Kazakhstan's highest-producing field Tengiz -- stressed none of its share of CPC volumes came from Russian fields, and the US Treasury had previously spoken of the ability to "segregate" Kazakh from Russian crude.

"Chevron equity crude transported through the Caspian pipeline is produced in Kazakhstan, it enters the pipeline in Kazakhstan, and it bears a Kazakhstan certificate of origin," the company said, adding that production from the consortium at Tengiz "continues uninterrupted" and exports via the CPC route continue "as normal."

"We continue to monitor developments and as always, comply with all current applicable laws and regulations," Chevron added.

Kazakh President Kassym-Jomart Tokayev has tried to steer a neutral policy course on the Ukraine invasion, speaking to both the Russian and Ukrainian presidents, Vladimir Putin and Volodymyr Zelensky, March 3 and urging negotiations. In January, Tokayev had called on the help of Russian security forces to help quell violent unrest.

Kazakh crude discounts have narrowed slightly since ballooning in early March in response to the Ukraine crisis, but remain close to $10/b compared with the Dated Brent benchmark.