Stakeholders representing eight shareholder companies involved in Kazakhstan’s major oil projects are conducting a feasibility study on expanding oil exports westward through the Caspian Sea and Azerbaijan. The timing of this matters.
Kazakhstan currently sends more than 80 percent of its crude exports through the Caspian Pipeline Consortium, a more than 1,500 km-long pipeline connecting the major oil fields of western Kazakhstan with a terminal near Novorossiysk on Russia’s Black Sea coast. Russia’s invasion of Ukraine has made reliance on this route increasingly uncertain. The terminal near Novorossiysk and tankers serving it have repeatedly been affected by fighting, forcing loading to be suspended at times.
Due to its location in the middle of the Eurasian landmass, Kazakhstan’s export routes have always been dictated by geography and geopolitics. If Astana wants to reduce its dependence on Russian infrastructure like the Caspian Pipeline Consortium, its options are limited.
One option is to move more oil east toward China. Kazakhstan already exports a small amount of crude eastward and Beijing would almost certainly welcome additional supplies. But dramatically increasing flows to China would require costly infrastructure upgrades.
Due to its location, Kazakhstan’s export routes have always been dictated by geography and geopolitics
Luke Coffey
Another theoretical option would be to move oil south through Turkmenistan and Iran before reaching ports on the Indian Ocean. It is obvious why this route is not currently commercially and politically realistic.
So, the most viable alternative runs southwest across the Caspian to Azerbaijan, at which point Kazakh crude can enter the existing pipeline network extending through the South Caucasus. In fact, in recent years, Kazakhstan has been working to increase the amount of oil it ships across the Caspian into this pipeline network.
Two routes are available: Baku-Tbilisi-Ceyhan and Baku-Supsa. Both have spare capacity but the former is a far more attractive option.
Baku-Supsa terminates on Georgia’s Black Sea coast. Although using it would allow Kazakh oil to avoid Russian territory, the oil would still enter a region impacted, even if indirectly, by the Russia-Ukraine war. Furthermore, about 1.6km of the pipeline passes through a section of Georgia occupied by Russia. So, the Baku-Supsa line is not ideal if trying to minimize geopolitical risk.
By contrast, the Baku-Tbilisi-Ceyhan pipeline carries oil across Azerbaijan, through Georgia and into Turkiye, ending at the Mediterranean port of Ceyhan. For Kazakhstan, access to the Mediterranean offers a preferable route to global markets.
But the challenge is getting significantly more oil from Kazakhstan’s major western fields across the Caspian and into the Azerbaijani system.
There are two main ways to do this. The first is by tanker. Kazakhstan already ships relatively small amounts of oil to Azerbaijan by tanker, where it then enters the Baku-Tbilisi-Ceyhan pipeline. The rate at which this oil is shipped is growing. During the first eight months of this year, shipments increased some 12 percent from last year.
But Caspian tankers are much smaller than the giant crude carriers plowing the world’s oceans. The enclosed nature of the Caspian and the limitations of port infrastructure mean that transport by tanker can only be scaled so far. It would be impossible to even come close to matching the amount of oil sent through the Caspian Pipeline Consortium using tankers in the Caspian.
Kazakhstan should begin the longer and more complicated work needed for a trans-Caspian oil pipeline
Luke Coffey
The second option is more ambitious: constructing an oil pipeline across the Caspian connecting Kazakhstan with Azerbaijan. From a technical and engineering standpoint, such a project is feasible. It would be expensive and take years to complete — but it is doable.
This is why Kazakhstan should pursue a dual-track approach. In the short term, it should expand tanker capacity to increase the amount of oil it can move into the Baku-Tbilisi-Ceyhan pipeline. At the same time, it should begin the longer and more complicated work needed for a trans-Caspian oil pipeline.
A Kazakhstan-Azerbaijan oil pipeline could also become a proof of concept for something even more strategically important: a future trans-Caspian gas connection. Due to the small size of the Caspian, the only profitable way to transport gas there is by pipeline.
In recent years, there have been calls for the construction of a gas pipeline connecting Turkmenistan directly with Azerbaijan. But the project has never gotten off the ground due to opposition from Tehran and Moscow, coupled with complex relations between Baku and Ashgabat. Both Russia and Iran have long viewed direct east-west energy links across the Caspian as a potential challenge to their influence over regional export routes. The same feelings would be shared regarding an oil pipeline connecting Kazakhstan with Azerbaijan.
Existing pipeline infrastructure already links gas fields in Turkmenistan with western Kazakhstan. One possibility would be to use this network and then construct a parallel gas pipeline alongside the new trans-Caspian oil route from Kazakhstan to Azerbaijan, where it could connect with the Southern Gas Corridor. The existing pipelines between Turkmenistan and Kazakhstan might require significant modernization but it would be worth the investment in the longer term.
There may be no better time to start. Kazakhstan needs more variety and greater resilience to geopolitical upheaval for its oil exports. At the same time, global markets continue to seek diverse and reliable sources of crude. Meanwhile, Moscow and Tehran are preoccupied with other security and economic problems, potentially reducing their ability to block new regional infrastructure initiatives. This would be particularly true if the project were to receive strong international backing.
Recent geopolitical shocks have demonstrated how easily global trade can be disrupted when a small number of routes or chokepoints become vulnerable. Even if the Russia-Ukraine war ends, Kazakhstan would be unwise to assume that instability in the Black Sea will disappear permanently.
Building alternative energy routes is therefore not about replacing existing ones. It is about mitigating the impact when routes are disrupted. Expanding tanker traffic today while laying the groundwork for a trans-Caspian pipeline tomorrow would give Kazakhstan something geography has made difficult: meaningful choice over how a very important export reaches global markets.
BY: Writer Luke Coffey is a senior fellow at the Hudson Institute.
Disclaimer The article presented above is a compilation of information drawn from publicly available sources, including news reports, social media accounts, and other open-source materials. It is intended for informational and analytical purposes only. The views expressed are solely the writer’s opinion and do not reflect the position of The Times Union.
