Russia orders shutdown of Kazakhstan’s key oil export moorings

Kazakhstan’s primary oil export terminal, responsible for handling crude oil pumped by US giants Chevron and Exxon Mobil, has been ordered by Russia to shut down two of its three moorings, according to a Reuters report. 

This move comes amidst a dispute between Kazakhstan and the Organization of the Petroleum Exporting Countries and allies’ regarding overproduction.

The Caspian Pipeline Consortium (CPC) operated by Kazakhstan is responsible for transporting approximately 1% of the global oil supply through the Russian Black Sea terminal. 

Recent disruptions

The CPC had recently announced a disruption in its operations. 

The operator revealed that two of its crucial moorings had been abruptly halted following unexpected inspections conducted by Russia’s transport watchdog. 

This sudden intervention by the regulatory body has raised concerns about potential impacts on the global oil market, given the CPC’s significant role in the supply chain. 

The incident also highlights the complex geopolitical landscape surrounding energy infrastructure and the potential for regulatory actions to disrupt the flow of oil, with implications for prices and market stability.

If the CPC export stoppage lasts longer than a week, it could result in exports being cut by more than half, according to the report.

Kazakhstan has often produced more oil than allowed by the OPEC+ agreement, which includes cartel members and allies such as Russia.

Challenges in restraining production

Despite the pressing need to align oil production with OPEC+ and stabilise energy markets, the government is facing significant challenges in persuading major oil companies to curtail output. 

These companies, having invested substantial capital — amounting to tens of billions of dollars — in expanding their production capacities within Kazakhstan’s largest oilfields, are reluctant to scale back operations. 

This resistance stems from their pursuit of maximising returns on their massive investments and their anticipation of continued profitability in the oil sector.

Last month, Kazakhstan’s energy minister resigned following tense negotiations regarding OPEC+ compliance.

Kazakhstan’s Minister of Energy, Almasadam Satkaliyev, resigned from his position in March. 

Kazakhstan’s presidential office had announced last month that Satkaliyev will lead the country’s newly established atomic energy agency.

Closures 

The mooring closures were implemented by CPC following an inspection by Russia’s transport watchdog, which revealed certain violations. 

These closures will allow the company to rectify the identified issues.

CPC did not disclose the specific nature of the violations or provide an estimated duration for the closures.

The inspection was initiated after an oil product spill caused by the sinking of a Russian tanker in the Kerch Strait in December.

CPC operations have been interrupted in the past due to technical outages, damage, and storms. 

Russia had previously closed the CPC moorings due to technical outages, and operations were suspended in 2022 and 2023 due to damage and storms. 

These interruptions had impacted Kazakhstan’s output and CPC exports.

A drone attack from Ukraine hit a pumping station that was part of the pipeline serving the terminal in February.

This was confirmed by both CPC and the Russian pipeline monopoly Transneft.

Reuters reported that the pipeline was expected to export 1.7 million barrels per day, which is around 6.5 million metric tons, in April.

In 2024, over 63 million metric tons (1.4 million barrels per day) were exported by the pipeline. 

The CPC’s major shareholders are Transneft, with 24%, and Kazakhstan’s KazMunayGas, with 19%. US-based companies Chevron and Exxon Mobil also hold shares.

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