Kazakhstan’s Oil Exports Face Black Sea Chokepoint

The Caspian Pipeline Consortium, which exports around 80% of Kazakhstan’s oil exports, was turned off for a week in mid-July, as producers grappled with the consequences of Russia and Ukraine’s heated conflict in the Black Sea.Between July 17-19, Ukrainian drones hit multiple oil tankers sailing to and from the CPC Marine Terminal at the Russian port of Novorossiysk, where the CPC ends its 1,500 km-journey originating from Kazakhstan’s largest oil fields, located in the west of the country.The attacks drew harsh condemnation from Kazakhstan’s government, but were more significant as they led to the wholesale suspension of the CPC’s operations – a move that the pipeline’s management attributed to an act of “terrorism,” though they did not name a specific country or actor at fault.Despite oil flows resuming this week, experts surveyed by Vlast said that the attacks have cast doubt on the CPC’s viability amid Ukraine’s increasingly intense drone campaign, and raised major questions for key players in the global energy industry, while threatening a key source of Kazakhstan’s budget revenues.Power of Geography The events of last week showed that Ukraine’s drone campaign has the potential to severely disrupt oil routes spanning the Black and Mediterranean Seas.Francesco Sassi, a postdoctoral researcher at the University of Oslo and the author of the Energy Geopolitics & Statecraft blog, said the attacks have put diplomats, producers, and traders on alert. “The situation is not going well neither for Kazakhstan’s government nor for the oil producers,” Sassi told Vlast.According to Natalia Katona, an independent oil analyst based in Abu Dhabi, continued attacks could lead to a dramatic change to the regional energy landscape. “Buyers of Black Sea oil have become reluctant to renew previous purchase orders because of the recent direct attacks on tankers,” Katona told Vlast.Photo: cpc.ru Most of the oil loaded at Novorossiysk originates from Kazakhstan and is shipped by international oil companies operating at the three major fields of Tengiz, Kashagan, and Karachaganak.Notably, the Black Sea strikes prompted a temporary dip in production at the Tengiz oil field, Kazakhstan’s primary source of oil exports.Tengizchevroil, which operates the field, is a joint venture between the US’s Chevron and Exxon, Kazakhstan’s Kazmunaigas, and Russia’s Lukoil.The company is also, by far, Kazakhstan’s top taxpayer.Chevron also owns a 15% stake in the CPC, which makes it a key player in the movement of oil from Kazakhstan to its export markets.But now, despite efforts by Mike Wirth, the company’s CEO, to reportedly lobby the US government into pressuring Ukraine away from attacking its Black Sea-assets, Kyiv’s strikes have put the CPC’s viability in jeopardy, at least in the short term.