Thursday, 28 May 2020 | 23:06
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Kazakh oil producers eye re-routing away from CPC as margins turn red

Thursday, 02 April 2020 | 19:00

Kazakh oil producers are seeking to re-route their flows away from a traditional private pipeline running to the Black Sea as CPC Blend discounts to Brent have widened to historic gaps, according to four industry sources.

Kazakhstan, the second biggest oil exporter after Russia among ex-Soviet countries, is using the Caspian Pipeline Consortium (CPC) pipeline to send its barrels to the Black Sea and Russia’s Transneft for exports via the Baltic Sea and the Black Sea, too.

Oil blended for the CPC route is known as CPC Blend while for Transneft destinations Kazakh barrels are mixed with Russian grades and sold as Urals Blend.

The CPC Blend discounts to Urals demonstrated all-time records in late March amid ruined demand for the grade, as refineries worldwide are cutting runs as millions of people are locked in their houses trying to stop coronavirus spillover.

CPC Blend was trading with a discount of as low as $10 per barrel to dated Brent BFO-CPC on Wednesday, while Urals differentials kept stable at around minus $4.35 per barrel to dated Brent BFO-URL-NWE, Reuters calculations show.

A sharp fall of the Russian rouble made the Transneft route – which sets tariffs in roubles – more attractive, while the CPC pipeline is charging in U.S. dollars.

CPC BLEND BECOMES URALS
Kazakh state-owned Kazmunaigaz will redirect some 700,000 barrels from the CPC pipeline to Transneft pipeline system this month to load a 100,000-tonne cargo of Urals from Ust-Luga on April 24-25, industry sources said.

“(Kazakhstan’s oil) suppliers turn to Ust-Luga, if it’s possible, as it is more profitable. Transportation costs are lower and the economy is better,” a trading source told Reuters. “This is all about minimizing losses.”

Kazmunaigaz, CPC pipeline and Transneft didn’t immediately answer Reuters requests for comment.

Kazakh oil companies have also started informal talks with the energy ministry to sell more oil at home, as export is losing its attractiveness, Kazakh oil source close to the government said.

The energy ministry told Reuters that there were no requests from big oil producers to increase supplies for domestic refineries.
Source: Reuters (Editing by Katya Golubkova, Editing by William Maclean)

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