Will oil go down the tube?
Caspian Pipeline Consortium has announced its intention to invest $150 mln in expansion of throughput by 1.5 times to 67 mln t in 2017 while reduction of oil output has been agreed internationally. Experts doubt the announced volumes to be pumped though this investment project is probably reasonable in the long-term run.
Pumping up the investments
Nikolai Gorban’, Director General of Caspian Pipeline Consortium (CPC) which transports oil from the fields in Western Kazakhstan to its own export terminal near Novorossiysk, told journalists that according to shippers’ requests, Tengiz-Novorossiysk pipeline is expected to pump 65.7 mln t of oil in 2017 including 54.7 mln t of Kazakh oil and 11.0 mln t of Russian oil.
In 2017, CPC is expected to accept 10.4 mln t of oil from the Kashagan field, and 5.4 mln t from the Filanovsky and Korchagin fields.
CPC is also going to complete its expansion project this year. $150 mln will be invested into the project in 2017. The launching of two pumping stations in the Astrakhan Region is scheduled for the first half of 2017, then pumping stations will be put into operation in the Krasnodar and Stavrapol regions. The last station to be put into operation in the Russian Federation under this project will be that in Kalmykia. In Kazakhstan, new station will be commissioned in the second half of 2017. When all the facilities are put into operation in the framework of the expansion project, the capacity of CPC will be as high as 67 mln t of oil per year. Earlier, full capacity upon completion of the expansion project was said to reach 76 mln t.
It should be noted that oil shipments by CPC terminal at the port of Novorossiysk in January-December 2016 grew by 3.6%, year-on-year, to 44.3 mln t. The boost announced for 2017 should be attributed to growing oil production in Kazakhstan (plan for 2017 - 20%), particularly, to commercial production resumed at the Kashagan field. Although the country authorities have announced possible revision of this plan amid OPEC+ agreements supported by Kazakhstan, it is not to touch the Kashagan, Tengiz or Karachaganak projects.
Besides, CPC throughput growth is supported by the development of LUKOIL projects in the Caspian region. Phase 2 at the Korchagin field is to be put into operation in spring 2018, at the Filanovsky field – in autumn of the next year. In 2016, LUKOIL produced 2.260 mln t of oil at the Northern Caspian fields (Filanovsky and Korchagin). This figure is planned to double in 2018.
Meanwhile, Vyacheslav Mishchenko, head of Argus Media Russia, CIS and Baltics, told IAA PortNews that the requests for CPC pumping exceed earlier forecasts of oil production. According to official forecasts, oil production at the Kashagan field can make 4-5 to 8-9 mln t in 2017, while the request for Kashagan oil pumping by CPC in 2017 is said to be 10.4 mln t.
According to Dmitry Baranov, leading expert of Finam Management, such an expansion of CPC capacity is anyway reasonable in the long run. “In this case, it should be proceeded from two aspects: first of all, it is done in view of long-term perspective, the pipeline expansion was foreseen initially. Secondly, oil is still one of the most demanded resources on the planet and its production will last for many decades. With the pipeline expansion, oil pumping will increase, relations with the customers will get stronger, new customers can appear and the Consortium participants can increase their income. Oil industry is still crucial for Kazakhstan and the country is going to continue paying much attention to it, to develop and support it, so the pipeline expansion is in line with these plans. Besides, it will let reinforce the position of Kazakhstan in the global oil market, will make fulfillment of its obligations to customers more comprehensive and accurate, will affect positively the budget of the Republic,” Dmitry Baranov said in his comment to IAA PortNews.
To be sure, oil exports via the port of Novorossiysk will thus grow considerably in 2017, though this growth will not be as high as it was announced, perhaps.