Page 9 - bne Magazine August 2022

bne August 2022 Companies & Markets I 9
away from Russia. Tokayev suggested that oil transportation across the Caspian Sea was “the most promising alternative”.
Prior to the outbreak of tensions with Russia over the Ukraine situation, there were plans to increase the volume of oil exports flowing through the CPC pipeline to up to 5.114mn tonnes this month, but that idea no longer looks realistic. Interestingly, the most recent CPC disruption came just one day after Tokayev held a phone conversation with EU Council President Charles Michel. During their conversation, Tokayev assured Michel that "Kazakhstan's hydrocarbon potential
is available in order to stabilise the situation on global and European energy markets.”
Plausible deniability
If Russia is attempting to "punish" the EU and Kazakhstan
and complicate the energy crisis more by cutting the Kazakh
oil supply using its local courts, it is an approach that offers Moscow plausible deniability. Whatever the realities, debates have been sparked in Nur-Sultan over the need for urgent export route diversification. Nothing, however, can happen overnight.
Two main options for supply diversification are usually talked about: directing oil flows to China and dispatching oil in trans-Caspian and trans-Caucasus shipments via Azerbaijan and Georgia.
The China option would see Kazakhstan re-route oil flows but the pipeline to China can take oil from east and central Kazakhstan, while most of the large fields are in the country’s west. Technically, it would be a rather challenging task, and, according to a foreign oil company based in the country, "it is unlikely that the re-route of oil is possible."
The second option, which would entail increasing oil exports on tankers traversing the Caspian Sea to Azerbaijan, from where the European market becomes accessible, sounds more
realistic – but there appears to be a stark shortage of tankers, and the project would require a great many. Again, officials might respond, “Great plan, but how many years can you give us to get it realised?”
Azerbaijan possesses the necessary energy infrastructure for oil flows to Europe, namely the Baku-Tbilisi-Ceyhan (BTC) oil pipeline that reaches Turkey. It has delivered around 518mn tonnes of oil to Europe since its inauguration. And in fact, the BTC pipeline already sends some Kazakh crude oil to Europe, though the volume is not significant.
The Russian court's decision to halt the CPC oil supply – later cancelled in favour of a small fine by a regional appellate court in Krasnodar – caused outrage in Kazakhstan. CPC argued
that the ruling was unlawful in that it posed long-term risks
to the pipeline's functionality. “CPC is a continuous-cycle enterprise. The immediate suspension of its activities could have irreversible consequences for the production process and cause adverse and uncontrollable processes at the facility,” the company said in a statement.
To some parties, the decision by the Krasnodar court to overturn the CPC suspension was a surprise and amounted to Moscow opting to de-escalate diplomatic tensions. But
the markets won’t be in any doubt – Russia successfully
sent the message that the fate of most of Kazakhstan’s oil exports remains in its hands. Russia's decision to hide behind provincial courts to camouflage a purely political context will not help reset relations with Kazakhstan. But the realities of the tense situation are inescapable.
Fuad Shahbazov is an independent policy analyst focusing on regional security issues in the South Caucasus and a Chevening FCDO scholar at the University of Durham School of Government and International Affairs (SGIA) . He tweets at @fuadshahbazov.
Uzbekistan creating gas processing industry to feed soaring domestic demand
Clare Nuttall in Qarshi and Tashkent
Rather than exporting natural gas as a raw material, Uzbekistan is investing into deep processing capacity to enable domestic production of fuels, plastics and other products.
The first synthetic diesel was produced at the newly built Uzbekistan GTL (UzGTL) gas-to-liquids (GTL) plant on July 1, in an important step in Uzbekistan’s quest to move away from natural gas exports to production of higher-value products domestically.
Uzbekistan, like its neighbours Kazakhstan and Turkmenistan, is a major producer of natural gas. It is planning to increase production, but rather than exporting the gas as a raw material, investments into processing capacity have been launched to help meet the demand of the country’s growing population and industrial sector for fuel, plastics and other products.
The GTL plant in Uzbekistan’s Kashkardarya region was officially opened on December 25, 2021. It is located south of the city of Qarshi, not far from Uzbekistan’s border with Turkmenistan,
www.bne.eu