Russia and Kazakhstan sign crude transport agreement

Russia and Kazakhstan have signed a 15-year agreement covering the transport of not less than 17.5 mm tpy (350,000 bpd) of Kazakhstani crude through Russia's crude pipeline system. According to the agreement, some 15 mm tpy will be exported from Kazakhstan via the Atyrau-Samara pipeline and 2.5 mm tpy will travel via the Makhachkala-Tikhoretsk-Novorossiisk route. The two sides have agreed to promote projects that will develop and expand the present crude export system as well as consider new export routes.
During a conference attended by Russian President Vladimir Putin and Kazakhstani President Nursultan Nazarbayev on June 7, Putin said the "agreement fully corresponds to the interests of both Kazakhstan and Russia. Kazakhstan gets transit guarantees for its oil, which takes into account rising output. It is also good for Russia as its transit status is fixed."

The agreement has no bearing on the Caspian Pipeline Consortium (CPC) system, which at this point carries crude produced at the Tengiz oilfield in western Kazakhstan, operated by TengizChevrOil (TCO). The CPC is operated by a Western-led group. It runs from the Tengiz field through southern Russia to the Black Sea port of Novorossiisk.
The CPC came onstream in October of 2001 with a design capacity of 560,000 bpd. Current throughput is around 250,000 bpd.

Kazakhstan’s crude production projections will require it to have multiple export routes. The Ministry of Energy and Mineral Resources has forecast crude production at 50-80 mm tpy (1.0-1.6 mm bpd) in 2005 and at 100 mm tpy (2 mm bpd) in 2010. Exports are projected to reach 46 mm tpy (920,000 bpd) in 2005 and 80 mm tpy (1.6 mm bpd) by 2010. Some 12 mm tons (240,000 bpd) of Kazakhstani crude were transported through Russia by pipeline or railroad car during 2000. The CPC system will eventually carry some 65 mm tpy (1.3 mm bpd) of Kazakhstani crude.
The US government has been urging Kazakhstan to commit volumes to the proposed Baku-Tbilisi-Ceyhan (BTC) crude pipeline, which will run to the Mediterranean. Construction of the 1,700 km BTC is expected to be sanctioned later this month. Meanwhile, the French company TotalFinaElf has been discussing with Kazakhstan the possibility of building a crude export pipeline running south through Iran in order to ship to Eastern crude markets.

Another agreement was signed covering the establishment of a joint gas company between Russia's Gazprom and Kazakhstan’s KazMunayGaz. The new joint venture, named KazRosGaz, will market, process, transport and sell Kazakhstani natural gas. The new firm is to provide Kazakhstan with increased access to European markets through the Russian natural gas pipeline system. The agreement called for the initial transport of 3.5 bn cmpy, with plans to boost this volume to 50 bn cm in time.