Caspian pipelines ease Russia's grip
By Robert M Cutler
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
Mahachkala, Dagestan, in the Russian Federation, for the pipeline ending at
Novorossiisk on the Black Sea. This appears to be no longer under
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
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
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
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
Robert M Cutler is senior research fellow, Institute of European, Russian
and Eurasian Studies, Carleton University, Canada.