Kazakhstan aims to significantly increase its crude oil exports to China by redirecting some oil flows from Europe to the world’s top oil importer, Kazakhstan’s Deputy Energy Minister Aset Magauov told Reuters in an interview published on Wednesday.
The Central Asian country, which is part of the non-OPEC group of oil producers in the OPEC+ production cut deal, plans to reverse its Kenkiyak-Atyrau oil pipeline for crude flows to the east from the current westward oil flow direction, the official told Reuters.
Kazakhstan will be aiming to increase its crude oil exports to China to 6-7 million tons annually, up from just 1 million tons currently.
Kazakhstan’s oil exports to the Chinese market slumped from a peak of 11.3 million tons in 2013 to just 1.3 million tons in 2018. According to Magauov, the plunge in exports to China has been mostly due to natural declines of oil fields in southern and northwest Kazakhstan, many of which are operated by Chinese oil companies.
Kazakhstan will now aim to reverse the decline in its Chinese exports by using the Kenkiyak-Atyrau in the eastern direction, thus linking more fields in western Kazakhstan to domestic refineries, freeing up volumes of oil for exports to the east.
More oil for exports to China would likely come from small fields, rather than from the giant Kashagan oil field, or the Tengiz and Karachaganak oilfields, because the western oil majors running those huge fields are not eager to sell in China as they are not particularly happy with the Chinese pricing formulas, Magauov told Reuters.
Kazakhstan—part of the non-OPEC group that have joined OPEC’s efforts to rebalance the oil market and prop up oil prices—has pledged to cut 40,000 bpd of its production and keep it at 1.86 million bpd between January and June. Kazakhstan, like all countries the OPEC+ pact, pledged this week to keep those cuts through the end of March 2020.
According to Kazakhstan’s energy ministry data, the country’s oil production averaged 1.79 million bpd in the first half of 2019, meaning, the ministry says, that Kazakhstan overcomplied with the cuts by reducing production by 70,000 bpd from its November 2018 level.