Kazakhstan to control Caspian crude supplies

Kazakhstan plans to control the supplies of its crude through the Caspian Sea. Currently, the government is involved in difficult negotiations with its partners for a 51 percent control stake in the Kazakhstan Caspian Transportation System (KCTS,) the Kazakh Minister of Energy and Mineral Resources Sauat Mynbayev told New Europe. “By all means, 51 percent; we will not join that project, formally or informally, for anything lower that 51 percent,” he said.

However, according to Mynbayev, this very position has caused disagreements with the other participants of the KCTS project. “We have differences with Chevron and the participants of the North-Caspian project,” the minister said. In January 2007, the national company KazMunaiGas, on behalf of the Kazakh government and the companies involved in North-Caspian project (Kashagan) along with the Tengiz group, Chevron Limited and ExxonMobil Kazakhstan Ventures Inc. signed a Memorandum of Understanding on the main principles of cooperation in the KTS project. The Kazakhstan Caspian Transportation System is designed to export Kazakhstan crude produced primarily at Kashagan and Tengiz through the Caspian Sea to international markets. The KCTS will include an oil pipeline Eskene-Kuryk, and a trans-Caspian system that will consist of oil-loading terminals on the Kazakh coast of the Caspian Sea, tankers and boats, oil-unloading terminals on the Azerbaijan coast of the Caspian Sea, and connecting lines to the oil pipeline Baku-Tbilisi-Ceyhan. It is planned that KCTS will initially carry 25 million tonnes a year, with a future increase capacity up to 38 million tonnes a year. “No doubt, considering the future big oil from Kashagan and the steadily growing volumes from Tengiz, this transportation project is commercially very important for the oil producers operating in Kazakhstan.


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The crude export quota will depend on the stake in KCTS,” a high-ranking KazMunaiGas source told New Europe, talking on condition of anonymity. His statement once again confirmed the words of the head of the Ministry of Energy that the negotiations on the future memorandum with the project parties (AGIP KCO companies and the Tengiz group) are not easy. “The differences are around the control over this route, but we are not going to give up the control over it,” Mynbayev said, explaining the current situation in the negotiations with the foreign partners. That said, he noted that the AGIP KCO owners, in principle, “did not strongly object to such a scenario.” However, Chevron has taken a principled position, he added.

Nurlan Balgimbaev In response to a question from New Europe, the Kazakh President’s advisor on the development of the Caspian Sea resources and a former head of KazakhOil and a former prime-minister, Nurlan Balgimbaev, said that there should be no hasty conclusions with regard to the negotiations. “I have received an invitation from Chevron, and we are going to meet with the company’s top managers soon to discuss the KCTS Memorandum. It is possible that the delay of the signing is connected with the world financial crisis,” he said. The high-ranking KazMunaiGas source commented that the invitation of such a prominent figure of the Kazakhstan oil industry as Balgimbaev indicated the seriousness of the issue. “In this situation, the intervention of Nurlan Balgimbaev should bring a balance of interests of the investors and of the Kazakh government,” the source said. The Kazakhstan office of Chevron declined to comment the Minister of Energy’s statement saying that until the negotiations are completed, it is premature to talk about any results or differences. The company representative New Europe talked to neither confirmed nor denied that Chevron had invited Balgimbaev to participate in the negotiations. “Chevron’s particular interest in the KCTS project is natural, as Kashagan is a matter for the future while Tengiz is already producing oil that the American company prefers to move through the Caspian Sea bypassing Russia, by the traditional route, CPC,” the source said. He also reminded that last October TCO (50 percent owned by Chevron Overseas Company – note by NE) had begun to move the first lot of Kazakhstan crude by tankers through the Caspian Sea to the oil pipeline Baku-Tbilisi-Cayhan.

TCO intends to continue to use this route the same way this year. The total cost of the project is estimated at USD 1.6 billion. Certainly, the stake in the project will depend on the share of the investment. “Now is a difficult situation with the financing of any major project. And if we rely on financing and if it means a smaller share, we should understand now that, at the time of the commissioning of the project, we should be able to take the ownership of 51 percent at a pre-agreed price. And this should be unconditional,” Mynbayev said.

New Europe