KCTS Transportation System is a Priority for Kazakhstan

 

The growth of oil production observed in Kazakhstan today proves our far reaching plans to join 20 countries-primary suppliers of oil and gas to the world markets. The state budget's revenues from oil sector make over a quarter of all budgetary incomes of the Republic of Kazakhstan. The oil & gas sector is the very mover in the long-range outlook for development of country's economy. In the short-term outlook we are planning to bring production to 150 MT per annum.

Kazakhstan's geography is not quite favorable to access open markets. The current options for Kazakhstan's hydrocarbon raw stock transportation meet our needs. However, expected multifold increase of production calls for enlargement of capacities and implementation of new projects regarding Kazakhstan's hydrocarbon raw stock transportation to the world's markets, and we keep on working in this direction.

The transport corridors we are using today are, firstly, Caspian Pipeline Consortium within Transneft's system. This route is used to export oil to the countries of the Black Sea and Baltic countries and enables to deliver more than 25 MT of oil per annum overseas. This pipeline is mainly transferring oil from Tengiz and Karachaganak. Aiming at CPC throughput enlargement, we have to install 10 pump stations, replace pipelines in some sections, extend tank farm's capacity and build a new offshore pipeline. We hope the final agreement package will be approved in the nearest time by all participants and stakeholders, thus sanctioning CPC enlargement project.

The pipeline running eastward is a route to China enabling to deliver Turgay's oil to western regions of this country.

Realizing Turkey's concern in the Bosporus Strait's overloading, we stated our desire to take part in delivery of hydrocarbons to Europe's market via Odessa-Brody and Burgas-Alexandroupolis oil pipelines. We are ready to examine all available options and we share the concern in environmental threat to the Black Sea and Mediterranean straits.

A priority for us and a matter of high probability is the so-called Kazakhstan-Caspian Transportation System (KCTS). This system is mainly intended to transport westward the oil produced on Kazakh shelf of the Caspian Sea. It comprises the oil pipeline in Kazakhstan on the Caspian Sea shore and the offshore segment to connect terminals in Kazakhstan and Azerbaijan. At the moment we are examining the business development plan and hoping to reach commercial agreements on business units under this project shortly. This project shall be executed by the date of first oil production commencement at Kashagan field. The agreement signed in June 2006 by Presidents of Azerbaijan and Kazakhstan provides the transfer of 25-38 MT of Kazakh oil by tankers alone.

We are also interested in the project covering installation of gas pipeline along the Caspian Sea bed, a Trans-Caspian route. Kazakhstan is interested in a stable European market. We understand some countries' concern in oil pipeline installation along the Caspian Sea bed. But construction of a gas pipeline along the Caspian Sea bed is less dangerous from environmental point of view. Such gas pipelines have already been operated in the Black, Mediterranean Seas and are planned to be constructed in the Baltic Sea. Therefore, having assessed the risk and ruled out all environmental threats, one can make this project come true. Turkmenistan is another country to work with as its involvement will make the project even more feasible.

Being western oriented, Kazakhstan does not forget the growing market of China. Commercial oil deliveries via Atasu-Alashankou pipeline commenced last year. This pipeline also transfers Russian oil from Western Siberia. Developing this project, we are going to launch the second phase, Kenkiyak-Kumkol. By mid-2008 the decision on investments is expected to be made and commercial terms under the second phase approved; its execution will enable China to obtain access to oil of Caspian origin.

Kazakhstan possesses sufficient gas resources but does not have an access to export routes as all them are fully controlled by Russia. Most gas treatment facilities are also located in Russia, which, undoubtedly, reduces economic gains from gas export, but on the other hand we observe proposals of gas delivery to growing Asian markets. The access to Chinese market calls for huge investments to create relevant infrastructure. The agreement on design and construction of gas pipeline to China was achieved in August 2005. By the results of engineering to be revealed this spring the parties are bound to make the final decision on this issue. This project firstly accounts for gas deliveries from Kashagan, Karachaganak, and Tengiz. We are going to discuss long-term deliveries of natural gas to China as soon as possible. At the initial stage it is planned to transfer 10 bln m3 of gas via the gas pipeline with annual throughput of 30 bln m3. The gas pipeline throughput increase and achievement of design load is expected by the year 2012. This pipeline will be completed approximately in 2009. 

Kazakhstan is also considering the option of Kazakhstan-Turkmenistan-Iran oil pipeline to be prolonged to the Persian Gulf in the outlook. This project has certain advantages in respect to Caspian oil delivery to markets of Europe, Eastern Asia and South Pacific. However, it will be possible to schedule the completion of this project only upon the launch of production at Kashagan field when the need for additional diversification of export routes arises.

Kazakhstan, adhering to the principle of multiple directions of hydrocarbons export delivery, will henceforth be extending its operations on maximum diversification of oil and gas transportation routes.