Russian court stops oil exports from Kazakhstan for 30 days

RUSSIA ENERGY / FINANCE - In Brief 06 Jul 2022 by Marcel Salikhov

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The Primorsky District Court of Novorossiysk city (Russia) decided to suspend the activities of the Caspian Pipeline Consortium (CPC, a company with the participation of Russia and Kazakhstan) from July 5 for 30 days. The reason was that Russian authorities revealed environmental violations at CPC production facilities. The inspection took place on May 6 on behalf of Deputy PM Victoria Abramchenko. The capacity of the CPC oil pipeline with a length of 1.5 thousand km and has a capacity of ~1.35 mbd. The route is the main one for transporting oil from Kazakhstan to Western markets. Oil from the pipe is shipped to tankers through the sea terminal near Novorossiysk port. 80% of Kazakh oil is exported to Europe via CPC and it is not yet subject to EU sanctions, although 10% of CPC oil is of Russian origin. Chart 1. Supplies via CPC by country of origin  Source: CPC, IEF estimates  The court's decision should mean a complete halt to CPC shipping. This will be a serious blow for TengizChevronOil and Kashagan, which have few alternatives. Deliveries to Samara in the Transneft system mean large discounts and are limited in capacity (~0.3 mbd, i.e. 22-25% of CPC capacity). Shipments through Aktau are more expensive and will require negotiations with Azerbaijan on the use of the BTC and will require additional tankers in the Caspian region. If the decision is implemented, Kazakhstan may lose up to 1 mbd in loading (excluding reorientation to other routes). It could create additional demand for Urals/Middle East oil in the Mediterranean and is additional pressure on the global oil market. We believe that the decision to stop the CPC has a political component. Relations between th...