Kazakhstan Eyes New Oil Export Route Via Caspian Sea

In keeping with its energy diversification strategy, Kazakshtan is taking steps to bolster its oil export capacity to the West via the Caspian Sea.

Development plans center on the Mangystau Region in western Kazakshtan, bordering the Caspian Sea. In the dusty streets of Kuryk, a town of about 12,000 residents, few seem to realize that the deep-water bay, with its turquoise waters, could soon become a major energy link for Western markets.

If all unfolds according to plan, in about four years the future port at Kuryk, located about 70 kilometers south of the regional capital of Aktau, will be able to handle shipments of up to 500,000 barrels of crude oil per day, pumped in from Atyrau Region to the north. From there, the oil will be shipped across the Caspian to Azerbaijan, where it will be funneled into the existing Baku-Tibilisi-Ceyhan (BTC) pipeline. [For background see the Eurasia Insight archive].

Though in recent months there has been increased talk about building undersea pipelines that forge direct links among Azerbaijan, Kazakhstan and Turkmenistan, Kazakhstani officials are not yet counting on such export routes becoming a reality. At the same time, they are eager to find new methods to export a large volume of oil from the Kashagan field. When it reaches peak production around 2019, Kashagan will produce up to 1.5 million barrels per day, enabling Kazakhstan to roughly double oil export volume to 120 million tons annually.

For now, Kazakhstani political leaders and oil executives are basing their export strategy on the so-called Kazakhstan Caspian Transport System (KCTS), of which the construction of the terminal at Kuryk is the centerpiece. To make the Kuryk export strategy viable, however, Kazakhstan also must: build a 600-kilometer pipeline linking the terminal to supplies in Atyrau; assemble a fleet of barges to transport the oil across the sea; and create a connection on the Azerbaijani side that can allow Kazakhstani energy to flow into the BTC pipeline.

Jaksybek Kulekeev, the first vice president of KazMunaiGas (KMG), the Kazakh national oil company, readily admitted that the construction of an undersea pipeline would, in theory, offer a far simpler solution to the present export dilemma. But, he added, existing conditions are precluding the creation of an undersea route in the near-term.

"From the economic point of view, when you have to convey between 20 and 56 millions tons of oil per year, it becomes interesting to build a pipeline," Kulekeev said. "But the Caspian Sea hasn't had its legal status defined, and it is