PREDICTED SCENARIO OF CASPIAN REGION ENERGY RESOURCES TRANSPORTATION AND PROSPECTS OF THE AKTAU - BAKU TRANSPORT CORRIDOR
Caspian bed is divided into three basic geological zones, i.e. Northern Caspian, Medium Caspian and the Southern Caspian. According to the estimation of Russian geologists the hydrocarbon reserves discovered in the region (oil, condensate and gas) are equal to 12 bln tons of equivalent fuel (e.f.). 7 bln tons of them make oil. The information of various sources about Caspian oil reserves differs greatly. In one of the sources the reserves are mentioned to be 13 bln tons, in another 22 bln tons, and in the next 50 bln tons. The Department of State report says, "Having 27.5 bln tons of oil the Caspian region can play a significant part in world's oil market. If the forecasts are proved, in nearest future the oil of the Caspian region could make 1/5 of the world oil reserves and balance with the reserves of Iraq and Kuwait together.
Kazakhstan enters the structure of the regional countries owning strategic stocks of hydrocarbons and Kazakhstan has more than 200 oil fields. The country took the second place among the republics of former USSR, and in the best years she used to recover 17-18 mln tons of oil. Independent Kazakhstan, via the territory of which 4,900 km of pipeline main is running, has fallen into Russian dependence in exporting oil and faced a number of problems in formation the republican energy in dependence. The only way out to Europe flor the export of Kazakh oil was through Samara. When the problem of Tengiz oil exports sprang out, Kazakhstan had to sense the dependence again. The Tengiz oil field was discovered in 1979. Recoverable reserves of it are estimated in 3 bln tons. It enters the ten largest oil fields of the world. Up to 1990 there were 60 wells and they recovered annually 3 mln tons of oil from them. In Soviet time the highly sulfuric oil from Tengiz, Kumkol, Jetibay and Karajanbas fields was mixed with light Russian oil (in ratio of 3: 7) at Samara base and were further exported abroad along the Druzhba main.
Early in 2001 the second well drilled by international OKIOC consortium at Kashagan field enabled to assert about existence of enormous hydrocarbon structure there.
If the reserves of Kashagan are proved it will be able to enter the structure of largest oil fields in world scale. The experts think, the Kashagan reserves could exceed the Tengiz reserves 2.5-fold. A discovery of this scale was done last in 1969 in Alaska at Prudhoe Bay.
President N. Nazarbayev said, his country would export 8 mln barrels of oil a day (400 mln tons a year) in 2015. On these figures Kazakhstam may lag behind only of Saudi Arabia. But, taking into account the new information, the western experts fail to agree with Nazarbayev and assert that Kazakhstan could in future produce only 250 mln tons of oil. If to think that Azerbaijan could also add to the said figure 120 mln tons, then we can with confidence assert that the Caspian regionis going to become the strongest source of oil not only in CIS, but in the entire world.
On general estimations, the world's consumption level in 2015 is expected in 4.5 bln tons. While the Caspian region can supply to the world market just 4.12 mln barrels of oil a day and recover 4.7 mln barrels of oil a day. If to compare the volume with daily output of largest oil suppliers to the world market, it will be obvious that this is a significant figure: Saudi Arabia recovers a day 8.1 mln barrels, Russia -6.3 mln barrels, Iran -3.4 mln barrels, China -2.8 mln barrels. It mean s that the Caspian region can take the 4th or 3rd place in the world. Being the first vice president of SOCAR I. Aliyev is sure that the Caspian region could shortly take the second place in the world due to hydrocarbon resources of Azerbaijan, Kazakhstan and Turkmenistan.
In 2002 Kazakhstan recovered 47.37 mln tons of oil and 5.2 mln tons of condensate. In 2003 the country plans to output 60 mln tons of oil. In the first quarter of 2003 Kazakhstan recovered 10.86 mln tons of oil and 1.53 mln tons of condensate.
In 2002 Azerbaijan's oil output was at the level of 15.2 mln tons, out of the volume 8 mln tons fall to the share of SOCAR and 6.83 mln tons to AIOC and 0.80 mln tons to the share of JV. In the first quarter 2003 Azerbaijan's output was 3.83 mln tons. Export of Azerbaijanian oil for the period was 2.03 mln tons. During the period mentioned AIOC recovered 1.62 mln tons of oil, and exported 1.44 mln tons of it via the Baku-Supsa pipeline. The output indices of AIOC from 1997 to this day are indicated below:
1997.....................0,5
1998....................2,37
1999....................4,81
2000....................5,07
2001....................5,90
2002....................6,39
2003 (plane)...6,45
Presently, the pipeline routes Baku-Novorossiysk, Baku-Supsa, Tengiz-Novorossiysk, Atyrau-Samara and Neka -Tehran routes are mainly used to deliver the caspian oil to world markets. In 2001 the aggregate carrying capacity of these pipelines made 81 mln tons, and in 2015 it will make 122 mln tons. But as we have already noted by 2015 oil production in these countries may reach 250-300 mln tons. As is apparent, in this case the carrying capacity of the pipelines is considerably lower than the export potential.
The indices of these routes are cited below:
Thus, in 2015 the carrying capacity of all pipelines in action and designed in the Caspian region can make 257 mln tons. The said figure is too close to above mentioned figure of potential oil production volume of the regional countries (250 - 300 mln tons).
On the other hand, during next 10 years oil and oil products transportation volume though Bosphorus and Dardanelles may increase twice. According to Turkish experts, oil and oil products throughput capacity of the straights is 80-82 mln. ton annually. At present the transportation volume is close to 75 mln ton. Acting on the full capacity, pipeline CPC (Tengiz-Novorossiysk) may create critical situation. We shall remind that throughput capacity of first turn of the CPC pipeline is 28 mln. ton annually; in 2008-2010 will be 67 mnl ton. In the eighties, during the highest oil export from USSR, app 100 mln. ton oil and oil products were transported through the straights. According to experts, due to the use of high technologies and navigational systems the throughput capacity of the straights can be increased up to 100-110 mln ton.
All these factors speeded up search of alternative routes for Caspian oil export, contributed to new projects realization, achievement of new agreements between interested parties. On June 11, 2001 in Almati an agreement was signed between Khazakstan National Company "Oil and Gas Transportation" (today "Kazmunaigaz") and US State Department. Under the agreement Kazakh party will receive grant at the amount of 346 thousand USD to study technical, economic and ecological aspects of the project of Kazakh oil transportation though BTC. Grant will be mainly used for study of part Aktau-Baku, which in future will join with BTC for Kazakh oil transportation. During agreement signing ceremony Mr. Kabildin, Deputy General Director of National Company "TNG" once again stated that N. Nazarbayev, President of Kzakhstan considers BTC pipeline as priority in oil transportation matters. At the meeting with US diplomat S. Mann, Kasimjomart Tokayev, Prime Minister of Kazakhstan spoke about transportation of Kazakh oil though BTC pipeline.
Feasibility study (FS) of the Kazakhstan-Turkmenistan-Iran project is prepared by TotalFinaElf on the instruction of Kazakh government.
Concerning Eastern variant, i.e. pipeline construction from Aktau till China, this project will have been launched by 2010. This pipeline may justify itself only in case of 20 mln ton oil transportation though it annually. Main reasons for project realization delay are breach of some agreement conditions, concluded in 1997 between Chinese National Petroleum Company (CNPC) and Kazakhstan Energy Ministry. But in spite of it, both parties are interested in project continuation.
According to the developed FS total length of Kazakhstan-China pipeline is app 3 thousand km, project cost is 3 billion USD and minimal annual throughput capacity is 20 mln ton.
In March pipeline Kenkiyak-Atirau for export of oil produced from Atirausk oilfield and Aktubinsk region of Kazakhstan, will be set in operation. Total length of pipeline is 448.8 km and diameter - 24 inches. Throughput capacity of the first turn is 6 mln ton, of second turn (2004) - 10 mln ton, third turn (2006) - 14 mln. ton. The pipeline is mainly used for transportation of oil produced by JV "CNPC-Aktobemunaygaz". We must note that Chinese National Petroleum Company possesses over 60% of shares in this JV. In 2002 CNPC produced 4.3 mln. ton oil. In 2003 the company intends to produce 5.2 mln ton oil. Due to linking Kazakh oil to BTC pipeline, which became possible following the fact that during Caspian status negotiations with Kazakhstan and Azerbaijan Russia obtained legal guarantees that pipeline will not be continued without her agreement, thus will not be laid in visible perspective, negotiations on transit of 20 mln ton Kazakh oil though sea route obtained more dynamic character.
O Agreement on formation of transport company Aktau-Baku, which will address all technical, financial and legal aspects of Caspian transit, is already reached. Approximately by the end of 2003 inter-governmental agreement on Kazakh oil transportation though capacities of BTC Co., will be ready and only following its signing, agreement between companies-participants of future Aktau-Baku company and already formed BTC Co. will be signed. Kairgeldi Kabildin, Managing director of JSC "Kazmunaygaz" stated that according to mutual agreement between parties, transportation of minimum 20 mln. ton oil bytankers though Aktau-Baku is considered expedient. From this volume app 6.5 mln ton will belong to companies-BTC Co. participants - ConocoFillips, Total, ENI, Inpex. The rest transit volume will be distributed among other companies interested in export their oil though BTC, which will be included to future pipeline company Aktau-Baku. At present 2-3 more foreign companies expressed their willingness to export oil by BTC. Aktau-Baku will form additional transport infrastructure both in Kazakhstan and Azerbaijan. K. Kabildin noted that, "company Kazmornefteflot intends to acquire tankers with tonnage up to 20 000 ton, as far as I know, the same will be done by Azerbaijan Caspian Sea steamship line". Inter-governmental agreement is intended to regulate principles of mutual relations between these subjects, which also conclude commercial contract between each other on oil transit and use of appropriate infrastructure. An agreement between Kazakhstan and BTC Co. will be concluded, on the basis of which all transport operations will be implemented.
Concerning ratification of agreement by Kazakhstan Parliament, K. Kabildin stated that existing problems in the legal field - non-settlement of Caspian status, shipping borders and its other aspects exclude this procedure. "We are obliged to act on the existing legal field and on the basis of the existing legal agreements on the Caspian Sea we are ready to fully guarantee unimpeded export of indicated oil volume though BTC". "We encounter no problems with Azerbaijan in this direction", said head of "Kazmunaygaz". "It's not excluded, that we'll export oil both though BTC pipeline and Baku-Novorossiysk; Baku-Supsa and Baku-Batumi are also ready for SWAP operations". We'll introduce so-called Bank of oil quality, to determine formula, which will enable exporters to deliver to consumers claimed quality oil for corresponding price.
And for a while Kazakh oil is transported though this route (Aktau-Dubendi-Batumi) since 1996; first by tankers and then though Azerbaijani and Georgian territory by railways or pipeline. In 2002 5 mln ton of Kazakh oil was transported though this route, which is 2.5 times higher than in previous year.
According to D.Woodward, President of company BP Azerbaijan, throughput capacity of BTC pipeline may increase for 20%. According to him, this may be achieved with installation of additional pumping stations and introduction of chemical reagents for decreasing pressure in pipeline. In 2008 extraction on the block Azeri-Chirag-Guneshli (ACG) will reach 50 mln tonn and it will provide complete "filling" of BTC pipeline. Expansion of throughput capacity for 20% will enable Kazakhstan to transport another 20 mln ton oil annually. As a result, total throughput capacity of BTC pipeline will make 70 mln tonn annually.
While exploiting BTC pipeline regular control over oil quality is stipulated. According to D.Woodward, oil produced from every field will be controlled. Oil of ACG and other Azerbaijan fields is distinguished by high quality. Quality of heavy Kazakh oil is considerably lower than light Azeri oil. Therefore for transportation though BTC of 20 mln ton Kazakh oil annually, use of special technology is stipulated. First of all Azeri oil will be filled under high pressure to pipeline and then Kazakh oil, between them special piston will be placed. As a result at the Ceyhan port Azeri oil with grade Azeri Light and Kazakh oil will be shipped separately.
According to Baku agency Media-Press, Israel government addressed to Kazakhstan government to support construction of corridor Aktau-Baku-Tbilisi-Ceyhan. As far back as in 1993 Israel for the first time put forward and idea of pipeline construction from Kazakhstan to Turkey.
In general, West-East corridor formation matters are under close attention of both USA and other Western countries. This interest is increasing with growth of new potential reserves. Pursuant to it, investment flow is growing, which clears up last doubts of successful realization of Caspian oil-gas strategy in world market.
By Anvar Abdullayev