China May Raise Price Bid for Kazakh Oil, Kazakhstan SaysNariman Gizitdinov and Stephen Bierman
China may offer a higher price for oil from Kazakhstan’s Kashagan project as it competes for the crude with other countries surrounding the Central Asian state.
“Right now at the Chinese border the prices aren’t exactly market -- they are significantly lower,” Kairgeldy Kabyldin, head of Kazakh pipeline operator AO KazTransOil, said yesterday in Almaty. “Our Chinese colleagues have announced that they will give a price” that’s competitive with oil traveling to Russia.
The $48 billion Kashagan deposit, which may become Kazakhstan’s largest producing oilfield, started output last month after years of delays. The project partners, including Exxon Mobil Corp., Royal Dutch Shell Plc and Eni SpA, have the option to export via several routes once production ramps up, with Russia, Azerbaijan and China vying to transport the crude.
China National Petroleum Corp. bought an 8.33 percent stake in Kashagan from state-owned KazMunaiGaz National Co. last month. China is seeking to import more crude to feed growing energy demand as its economy expands.
Kashagan exports are due to begin this month. Production at the Caspian Sea field will rise to 370,000 barrels a day in the first phase from an initial 40,000 barrels a day, Kurmangazy Iskaziyev, deputy head of KazMunaiGaz, said yesterday in Almaty.
The priority route for Kashagan crude will be the Chevron Corp.-backed Caspian Pipeline Consortium link, which runs to the Russian Black Sea port of Novorossiysk, Iskaziyev said. Companies without access to the CPC link can use Russia’s Atyrau-Samara link or the route via China, Kabyldin said.
CPC offers the most profitable route because the crude retains its quality in transit, according to KazTransOil’s Kabyldin. The Russian network to Samara doesn’t offer the same guarantee, and the exported crude sells as Urals blend, which currently sells at $3.50 a barrel less than Kazakh oil, he said.
The Azeri route and rail options also aren’t as profitable, Nurtas Shmanov, deputy head of transportation at KazMunaiGaz, said yesterday. Kashagan partners are yet to come to an agreement with China to open up the eastern route, he said.
The Chinese route, running from Atyrau in western Kazakhstan to Alashankou in northwest China, may be a viable option as CNPC is discussing pricing with Kashagan partners, as well as with developers of other Kazakh oil projects such as Tengiz and Karachaganak, Kabyldin said. The route could handle 3 million tons this year and 6 million tons next year, he said.
Two calls to state-owned CNPC outside normal office hours went unanswered yesterday.
Exxon, Shell, Eni and Total SA each hold 16.81 percent of the Kashagan project. Japan’s Inpex Corp. owns 7.56 percent and KazMunaiGaz 16.88 percent.