BUSINESS. This year, the pipeline carrying the crude oil from Kazakhstan and Russia to the Black Sea will double its transfer capacity up to a level of 67 million tonnes/year.
The measure will also reflect in Romania and will consolidate the strategic partnership entered at the end of 2016 between the oil and gas company in Kazakhstan, KazMunayGas, and the Chinese company CEFC. The latter is KMG International's sole shareholder, the group that owns Rompetrol Georgia.
Built in 1992, the Caspian Pipeline Consortium is the largest international oil transport project, collecting and transporting the crude oil from the large oil field in Western Kazakhstan, but also to Russia, the Novorossiysk harbour in the Black Sea.
It is a 1,500 km long pipeline, with a current transfer capacity of approximately 28.3 million tonnes/year; it was commissioned in April 2003. The main shareholders and beneficiaries of this project are Russia (24%), Kazakhstan (20.7%), but also important oil companies such as Chevron, Shell, Eni, Lukoil, Mobil or Rosneft.
The company operating the pipeline – CPC – announced last week it will allocate approximately USD 150 million this year in order to finish the capacity extension project, and the construction, respectively, of 6 new crude oil pumping stations along the line in Russia (two in the region of Astrahan and one in Krasnodar, Stavropol and Kalmykia each) and Kazakhstan.
The company announced that it has so far received news about the intention of oil producers in the two states to pump a quantity of 65.7 million tonnes of crude oil for this year, 54.7 million of which from Kazakhstan.
Kazakhstan’s crude oil production is rising
The operators of the largest 2 oil fields in Kazakhstan announced two important measures last year to ensure a long-term increase of the production. Thus, the shareholders of the Tengiz perimeter, located in the Western part of the country will allocate circa USD 36.8 billion until 2022 to help increase the production by circa 260,000 barrels a day up to a level of circa one million barrel/day. Discovered in 1979, this is one of the deepest super-gigantic oil fields developed in the world, with a recovery potential of 6-9 billion barrels (approximately one billion tonnes). At the same time, the Kashagan perimeter – the largest relevant discovery in the last 40 years - was commissioned, reaching one million tonnes of crude oil extracted in 2016. This offshore field in the Caspian Sea was discovered in 2000 and has estimated reserves of circa 4.8 billion tonnes of crude oil and 1 billion cubic meters of natural gas.
According to the Energy Minister of Kazakhstan - Kanat Bozumbayev, the 2016 total production amounted to 78 million tonnes, above the planned level of 75.5 million tonnes. Circa 62 million tonnes of that quantity were exported, and 40 million tonnes were transferred to the Black Sea by means of the CPC pipeline. At the same time, Kazakhstan’s crude oil export to China last year were circa 20 million tonnes.
What these major projects share in common is Kazakhstan’s national oil and Gas Company – KazMunayGas (KMG), holding interests both in the CPC pipeline (19%) and the two oil perimeters Tengiz (20%) and Kashagan (16%). In addition, KMG has, since 2008, been the sole owner of the oil terminal in the Batumi Georgia harbour.
Moreover, KazMunayGas also ensures the crude oil transport from the starting point of CPC – the Novorossiysk harbour in the Black Sea to the Midia harbour, and the oil terminal of Petromidia Năvodari Refinery, respectively – the largest relevant unit in Romania and one of the state-of-the-art refineries in the Black Sea Region. Since 2011, KMG has extended – through its company, KazMorTransFlot –the crude oil and oil products transport operations to the Black Sea – the Mediterranean Sea by building two Aframax oil tanks, a total investment of more than USD 100 million.
KMG, strategic partnership with CEFC
At the end of the last year, KMG concluded with the Chinese company CEFC all the documents required to establish a strategic partnership, making the activities and operations of the KMG International Group (the former Rompetrol Grup) a development and consolidation platform for the two companies’ presence in the Black Sea Region, as well as in Europe. Thus, CEFC will become shareholder of KMG International, to hold 51%, while KMG will hold the other 49%; the transaction deadline is set for the end of June.
As agreed, Rompetrol will continue to receive crude oil from Kazakhstan, in order to supply its two refineries in Romania, Vega and Petromidia: 125 million of tonnes in the next 15 years (8.4 million tonnes of crude oil/year), which will not only ensure the long-term operation of Petromidia, but is also an advantage for Romania’s power security in that it reduces the dependency on the Russian federation’s resources.
Moreover, Petromidia, as the largest refinery in the country, processing capacity of 5 million tonnes a year, could significantly increase its annual processing capacity in the near future.
“This is a topic on our agenda, we will need to conduct all these economic surveys. However, we can confirm that we are carefully looking at these matters, which could be implemented maybe in the near future. We don’t mean doubling the capacity as it is, but increasing it up to 7-8 million tonnes”, according to Alexey Golovin, corporate development and strategy vice-chairman at KazMunayGas International.
The calculations rely on positive hypotheses, as Rompetrol’s last year was exceptional. “We break new records every year, and the same happened in 2016. We have reach a number of historical indicators. We have reached an average of 15.7 kt per day, which is the highest indicator for the Petromidia Refinery; also the highest gas-oil production of 2.52 million tonnes. It is important to see that this year’s energy intensity index was the lowest, as our energy efficiency is improving yearly, with the lowest processing cost in the latest ten years”, Golovin explains.
Due to the partnership with CEFC, the investment forecast for the next 5 years might rise up to at least 3 billion dollars, amount to be allocated for the support and strategic development of the KMG International Group, with Romania as main platform for the relevant activities and operations.
“We don’t mean doubling the capacity as it is, but increasing it up from approximately 5 million tonnes up to 7-8 million tonnes”
Alexey Golovin, KazMunayGas International’s corporate development and strategy vice-chairman
http://www.m.capital.ro/strategia-chinezilor-creste-afacerile-rafinariei-petromidia.html