Russian CPC oil terminal fully meeting Kazakh needs amid BTC hiatus: executive

Russia's CPC crude loading facilities on the Black Sea are fully able to meet the current needs of Kazakhstan -- the main source for CPC Blend -- pending the current suspension of the alternative BTC route through Azerbaijan, a senior Kazakh industry official said on Aug. 21.

Speaking on an investor call, Bulat Zakirov, deputy chair of KazMunayGaz, confirmed Azerbaijan's Baku-Tbilisi-Ceyhan pipeline remains subject to force majeure for producers such as Kazakhstan – an effectively landlocked country that relies on Russia for sending crude to markets, but also uses other routes such as BTC.

Azerbaijan and its partners -- principally BP -- announced on July 24 that organic chloride contamination had been found in some oil exports from the port of Ceyhan on Turkey's coast. A number of European buyers received the contaminated crude, which can be potentially highly damaging for refining systems. The source of the problem has yet to be revealed, but loadings at Ceyhan have been getting back to normal with a system of sampling in place to ensure quality, BP said earlier.

Prices for Azeri Light have been recovering, with the grade assessed by Platts at a $2/b premium to Dated Brent, on Aug. 21.

Meanwhile, despite recent maintenance at the CPC facilities at the Russian Black Sea port of Novorossiisk, Zakirov said the CPC facilities were fully sufficient for Kazakhstan's present needs. Ship tracking data from S&P Global Commodities at Sea shows CPC loadings averaging as much as 1.9 million b/d in the week beginning on Aug. 11.

The BTC force majeure "remains in place up to the present time. Due to this, we in this period redirected crude through CPC -- we have enough capacity there," Zakirov said.

"We expect a resolution of this situation and the lifting of force majeure, and then we'll examine the resumption" of BTC exports, he added. "Currently the capabilities for loading via CPC are enough for transportation of all volumes produced today in Kazakhstan," he said.

Export options

Kazakhstan had been increasing its shipments across the Caspian to the BTC system operated by BP prior to the hiatus, partly in response to fears of over-reliance on the giant CPC route, and the risk of disruption stemming from the Russia-Ukraine war – a drone attack on a CPC pumping station disrupted throughput in February.

However, Kazakh volumes via BTC have remained relatively low – they were forecast to be around 1.7 million mt this year, or some 35,000 b/d, before the current hiatus.

Crude sold as Azeri Light tends to attract higher prices than the Kazakh CPC Blend, reflecting the use of the Azeri grade in manufacturing light oil products such as jet fuel and gasoline, and middle distillates.

CAS data indicates trans-Caspian shipments to BTC from Turkmenistan, Kazakhstan's neighbor, already resumed around Aug. 10. Turkmen crude is supplied via BTC on a different commercial and legal basis from Kazakh crude, a source close to the matter told Energy, explaining this difference in timing.

There has been no evidence to suggest the organic chlorides originated in Kazakhstan, and Kazakh officials say such chemicals are not used by their country's oil industry.

CPC maintenance

On Aug. 18, the Caspian Pipeline Consortium announced loadings at Novorossiisk were restricted to two out of the three offshore loading buoys. One of the buoys -- known as Single Point Mooring system No. 3 -- had been taken offline on Aug. 15 for planned replacement of hoses, with the work expected to last three weeks, the consortium said, implying completion on Sept. 5. However, Kazakh officials have repeatedly said two loadings buoys are sufficient due to spare capacity.

CPC Blend was assessed by Platts, part of Energy, at a 70 cent discount to Dated Brent on Aug. 21.

Azertrans, the Azeri company that handles crude arriving at Sangachal for transportation through BTC, did not respond to a request for comment.