Yelena Kalyuzhnova and Murat Ospanov
Centre for Euro-Asian Studies, University of Reading, UK
Since 2022 Kazakhstan has become increasingly concerned about the resilience of its energy infrastructure and alternative energy routes due to the impact of Western sanctions on the Russian energy supply and its implications for the Kazakhstani energy industry. The vulnerability of Kazakhstani energy export could be explained by the fact that 80 percent of all oil produced in Western Kazakhstan (major oil producing region) is exported to or via Russia. Such exposure to Russia can give rise to monopolistic practices in the export of Kazakh energy. For example, Kazakhstan faced oil export quotas imposed by Transneft (the Russian pipeline monopoly) at a time when the Russian government was reluctant to expand the capacity of the CPC pipeline. In 2022 the Urals crude oil price fell around 40%, which negatively impacted country’s GDP.
Recent Western sanctions against Russia impacted Kazakhstan’s options to export energy to European markets, due to the fact that the majority of the energy infrastructure goes through Russia via the CPC pipeline, which is owned by a consortium in which Russian firms have the biggest stake. Using alternative routes presents a number of challenges (commercial, legal, logistical, etc) as well as being limited in capacities. In addition to the CPC, other pipeline routes (also belonging to Russia) used to transport a quarter of Kazakhstani oil. These pipelines are similarly affected by the European Union sanctions. Since Kazakhstan is a landlock country, the export of oil and gas was always a challenge. The country is dependent on Russian transit routes as well as on the Soviet-era infrastructure and the Kazakhstan-China pipeline.
In 2022 Kazakhstan transported oil exports via non-Russian routes, and its export reached 1.8 million tons in 2022. In January 2023, Russia granted Kaztransoil (Kazakhstani transport company) the use of its Druzhba pipeline to deliver oil to Germany and Poland (according to Kazakh officials, that could reach 1.5 million tons in 2023). Kazakhstan hopes to deliver up to 1.5 million tons of oil through the Baku-Tbilisi-Ceyhan pipeline as an alternative route to the CPC; however, geographical constraints and China’s options to buy discounted Russian crude restrict further growth of Kazakh energy. According to the OPEC forecast, in 2023 Kazakhstan will raise the production of oil and gas condensate by 160,000 barrels per day, yet there are many external factors which might negatively affect such predictions.
In 2023 the gas and condensate producer Karachaganak reported problems with gas processing and shipping capacity restrictions. Since November 2022 production capacity has been partially constrained by a long-running maintenance at the Orenburg gas processing plant, which is linked to Karachaganak by a pipeline (part of Soviet infrastructure). It is the key facility for Karachaganak.
Taking into account the current sanctions imposed on Russian transit routes, the paper will analyze current pipeline infrastructure and other main impediments impacting oil and gas production and export from Kazakhstan. It will explore different routes to the urgently needed diversification required to make Kazakhstan a low-cost supplier in the global energy market. The paper will take the perspective of multi-vector energy policy and will explore how Kazakhstan could ensure that Russia, China, the EU, and the U.S. have an interest in maintaining regional security. Finally, the potential investment scenarios into Kazakh energy sector will be analyzed. These investments potentially could become the key instruments to the diversification strategies.
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