July 3, 2019 / 1:49 PM / 4 months ago

Kazakhstan to divert some oil flows from Europe to China

NUR-SULTAN (Reuters) - Kazakhstan plans to increase oil exports to China to 6-7 million tonnes a year from just 1 million tonnes at the expense of shipments to Europe, starting from the second half of 2020, Deputy Energy Minister Aset Magauov told Reuters.

In order to do this, the Central Asian nation will reverse the domestic Kenkiyak-Atyrau pipeline that is currently used to ship crude in a westerly direction. The move will reduce transit shipments through Russia’s Transneft (TRNF_p.MM).

“The oil pumped in the other direction will be heavier, this will require upgrades in the form of building extra pumping stations,” Magauov said.

Kazakh oil exports to China dropped to 1.3 million tonnes last year from their peak of 11.8 million tonnes in 2013 while Russia increased its own supplies to China at the same time.

Magauov said that was largely due to the declining output of oilfields in northwestern and southern Kazakhstan - many of which operated by Chinese companies. The same companies supply a large share of oil used by Kazakhstan’s Shymkent and Pavlodar refineries, leaving little for exports.

The Kenkiyak-Atyrau pipeline reversal will link more oilfields in western Kazakhstan to the refineries and free up the same volumes from the south and the northwest to be shipped to China.

Additional sales to China are likely to come from small- and medium-sized fields rather than the giant Kashagan, Tengiz and Karachaganak projects run by Western energy majors, Magauov said, because the latter are unhappy with the pricing formula used by China.

Reporting by Alla Afanasyeva; Writing by Olzhas Auyezov; editing by David Evans

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