September 27, 2008

Transit of Kazakh Oil Via Baku-Tbilisi-Ceyhan Pipeline Boosts Regional Security

In an interview with journalists, the head of the Kazakh national oil and gas company KazMunayGaz, Kairgeldy Kabyldin, talks about the strategy of developing oil export routes from Kazakhstan and Kazakhstan's participation in several international oil projects. He attempts to alleviate fears that the recent Russian-Georgian conflict will increase the risk of exporting oil via the Baku- Tbilisi-Ceyhan pipeline. He says Kazakhstan will not change plans for exporting oil via this pipeline and suggests that the transit of Kazakh oil in this direction will be an element of stability in the region. Kabyldin also says that Kazakhstan and Russia are planning to buy Oman's share in the Caspian Pipeline Consortium and talks about the possibility of setting up joint oil refineries in Turkey and Iran. The following is an excerpt from Kairgeldy Kabyldin's interview, published by the Kazakh newspaper Panorama on 19 September; subheadings inserted editorially:

The new head of the National KazMunayGaz [Kazakh Oil and Gas] joint-stock company, Kairgeldy Kabyldin, recently spoke to journalists, including a Panorama correspondent, about the strategy of developing export oil routes from Kazakhstan and the national company's participation in some international projects.

[Question:] As is known, Kazakhstan plans to very soon arrange the delivery of its oil to the Baku-Tbilisi-Ceyhan [oil pipeline, BTC] via the territory of Azerbaijan and increase oil transport to [Georgia's] Batumi. However, after the recent events in Georgia [conflict between Georgia and Russia], traders are expressing their fears over the efficiency of the Caucasian direction and the pressure on the part of Russia. To what extent are Kazakhstan's plans regarding these routes realistic?

[Kairgeldy Kabyldin:] The above mentioned supplies will be arranged by means of the Kazakh Caspian Transportation System (KCTS). KazMunayGaz is a business structure, so we do not make political assessments of these kinds of events. I would not say today that risks of [transporting oil via] the trans-Caucasian corridor via the BTC pipeline have increased due to the Russian- Georgian conflict. The pipeline was built five years ago, and was planned even earlier, some 10 years ago. Russia has never spoken against this direction, but it has only said it can offer a better route. All this is nothing but a coincidence of events. We will not change our plans for using this corridor. On the contrary, we think that the transit of Kazakh oil in this direction will be an element of stability in the region. This is because you know that any country signing international transit agreements guarantees the stability of oil supplies and the freedom of transit. The rest is an issue for politicians. I believe that it is business and trade economic relations that will regulate political and interethnic problems in the long run. But let us here separate the issue of the conflict from the issue of the transit and transport of oil along the Baku-Batumi corridor and the BTC pipeline.

Building new pipelines economically unjustified

[Question:] [US] Vice-President Dick Cheney recently called on Georgia and [other] republics of the former Soviet Union to build new export pipelines bypassing Russia. What is Kazakhstan's attitude toward this and does it envisage any talks with the European Union and the USA in this regard?

[Kairgeldy Kabyldin:] President Nursultan Nazarbayev announced the need to create a multi-vector oil and gas transport system back at the time when Kazakhstan just gained its state independence. Today we are implementing projects for delivering our oil via the Caspian Pipeline Consortium (CPC) to Batumi and China. We are not giving up those projects that were defined earlier. We are planning to use the BTC pipeline, which currently carries 37-40 million tonnes of oil a year and whose annual throughput capacity is 50 million tonnes of oil. We are keeping an eye on the Baku-Supsa pipeline, which is capable of transporting 10 million tonnes of oil a year and which has already been staying idle for two years. It might not be in the interests of Georgia and Azerbaijan not to use this asset that can bring significant benefits to the two countries

[Passage omitted: Kazakhstan will extract 120m t of oil a year in the near future; of these, 100m will be exported]

Mr Cheney's proposal, which definitely contains a political tint (bypass and non-Russian path), is not new for Kazakhstan. It is logically right to always have an alternative. However, we believe that, in the conditions of having unused capacities of the existing pipelines, building new ones would be economically unjustified. But expanding or building additional capacities for the existing pipelines is another matter. Currently we are ready to pay for transit.

[Passage omitted: Kazakhstan is planning to build a pipeline segment to connect the Kenkiyak-Kumkol and Atasy-Alashankoy pipelines that carry oil to China; Kazakhstan will send about 7m t of oil extracted at the Kumkol field and another 5m t of oil extracted in Aktobe region to China via the new pipeline segment]

Kazakhstan, Russia plans to buy Oman's share in CPC

[Question:] How is the issue of selling Oman's share in the CPC being tackled, taking into account the mutual interest of Kazakhstan and Russia to buy it?

[Kairgeldy Kabyldin:] The CPC consists of two parts: one part is private companies and the other part is state companies. Oman's share belongs to government shareholders. Two other government shareholders Russia and Kazakhstan have the priority right to buy Oman's share. Both of them have expressed the wish to buy Oman's share in the project to maintain the balance of interests. If the share is bought by a private company, then the initial balance of interests in the CPC might be disrupted. In other words, government shareholders might lose their influence. That is why Kazakhstan has agreed with the Russian side to preserve the balance. It is not ruled out that Oman's share will be bought by one of the countries or by both of them. I any case, the balance of interests will be preserved. Everything depends on commercial talks.

Joint oil refinery projects in Turkey and Iran

[Question:] Does Kazakhstan still have plans to build oil refineries in Turkey or Iran? If the answer is yes, then at what stage are the projects now?

[Kairgeldy Kabyldin:] Yes, we are planning to build an oil refinery in Ceyhan.

[Passage omitted: Ceyhan is a good place to do business]

Currently Kazakhstan and Azerbaijan are considering the Turkish side's proposal to build a modern super-plant which, apart from producing oil products of European quality, could produce petrochemical products. We have even suggested to our Russian colleagues to take part in the project. Today we are conducting talks and considering plans for our country's possible participation in such an oil refinery from 2013 and further. The Turkish side has to prepare a feasibility study and resolve the issue of allocating land. This issue is very topical. After that we will make a decision.

Iran is also suggesting we should take part in building an oil refinery in the north of the Caspian, which is a good idea. They offer to initiate cooperation as part of swap operations and suggest that we have a share in the refinery. The only "but" is that there are certain investment restrictions as a result of this country's position in international politics. As of today, we have agreed with our Iranian colleagues that by the end of this year they will prepare a feasibility study for the oil refinery project and give it to us for studying. And why not, if this is business and, moreover, good business [at that]? If we take part in this project, we will have access to the Asian market. Currently, about 80 per cent of Southeast Asia gets oil from the Persian Gulf.

[Question:] Can you give us specific figures?

[Kairgeldy Kabyldin:] Usually a refinery is designed to process about 5-6m of tonnes of oil per year. Later, by building additional facilities, the plant's production capacity can be increased. Currently the point is about a business proposal that does not contain any specific figures.

[Passage omitted: Kazakhstan plans to increase its natural gas exports as part of an agreement to develop oil and gas transport system between Uzbekistan, Kazakhstan, Turkmenistan and Russia]

Originally published by Panorama, Almaty, in Russian 19 Sep 08 p9.

(c) 2008 BBC Monitoring Central Asia. Provided by ProQuest LLC. All rights Reserved.