Diversification of pipelines, best solution for Kazakhstan
By Aynur Jafarova
The economic war between Russia and the West, and the sanctions imposed against Russia over the Ukraine crisis has forced the region's oil-rich countries to revise their future plans on export of hydrocarbon resources.
Central Asian country Kazakhstan has close ties with its powerful neighbor Russia within the Eurasian Economic Union and exports its natural energy resources via Russian pipelines.
However, the sanctions imposed on Russia affect all the member countries of the union, and make Kazakhstan to think over the diversification of its pipelines twice. So, oil-rich Kazakhstan has already started to look for a way out of the presumed situation.
Recently Kazakh Energy Ministry said Kazakhstan is considering oil export routes which could go beyond Russian oil, including oil transportation from the Aktau port through the Caspian Sea, then through Azerbaijan and beyond.
The most potential large market for Kazakhstan's oil is China, while another alternative option is Iran.
However, these two possible markets have several disadvantages for Kazakhstan. Because, if Kazakhstan exports its oil through Iran it will face the rivalry of major and traditional players of the Persian Gulf market. Also, the awkward relations between Iran and the West avoid Kazakhstan to consider this option.
China is also an attractive option for export of Kazakh oil. However, energy-hungry China will import all the oil exported from Kazakhstan and this situation will not correspond to Kazakhstan's diversification policy.
In this regard a new option appears: the Baku-Supsa pipeline.
Russian expert on the Caspian region Igor Ivakhnenko believes if the EU reduces import of Russian oil in favor of other suppliers, Kazakhstan may try to use the opportunity.
In this regard, the most cost-effective route for the export of Caspian raw materials is the Baku-Supsa pipeline and if Kazakhstan manages to get access to that route, it will greatly enhance its oil export profitability.
Currently, Kazakhstan exports part of its oil through Azerbaijan via the Baku-Tbilisi-Ceyhan oil pipeline. There are also significant opportunities to deliver the Kazakh oil to the Black Sea region via a railway through Azerbaijan.