Kazakhstan Bypasses Russia By Selling Oil Via Azeri Pipeline

Kazakhstan is expected to sell some of its crude oil through Azerbaijan's biggest oil pipeline from September, as the nation seeks alternatives to a route Russia threatened to shut, three sources familiar with the matter said, Reuters reported.

Photo Insert: Shah Deniz 2 is where the Southern Gas Corridor series of pipelines that are now delivering natural gas from the Caspian Sea to European markets begin.

Kazakh oil exports account for more than 1% of world supplies, or roughly 1.4 million barrels per day (bpd.) For 20 years, they have been shipped through the CPC pipeline to Russia's Black Sea port of Novorossiisk, which provides access to the global market.

In July, a Russian court threatened to shut the CPC, prompting the Kazakh government and major foreign producers to set up contracts for other outlets as a precaution. None of the alternatives are as practical as the CPC pipeline, raising the risk of further volatility on energy markets.

Shortly after Russia invaded Ukraine in February, international crude prices hit 14-year-highs and prices have stayed high, sustaining an average above $100 a barrel in July.

A source with direct knowledge of the matter said Kazakhstan's state oil firm Kazmunaigaz (KMG) was in advanced discussions with the trading arm of Azerbaijan's state firm SOCAR to allow 1.5 million tons per year of Kazakh crude to be sold through the Azeri pipeline that delivers oil to Turkey's Mediterranean port of Ceyhan.

At just over 30,000 bpd, the volume is a trickle compared to the usual 1.3-1.4 million bpd that flows through the CPC pipeline.

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