by KEBCO Kazakh crude oil is the top 3 major oils supplied to Europe.
Abzal Narymbetov, oil and gas industry expert and author of the Energy Analytics Telegram channel said that “Kazakhstan does not yet have any issues with sanctions against Russia”. KEBCO remains one of the few options for replacing Urals medium sour oil after the EU embargo.
“Transportation routes – Caspian Pipeline Consortium takes 80% of exports, Atyrau – Samara – 13%, through the port Aktau – Makhachkala – Novorossiysk – 3%, through Baku-Tbilisi-Ceyhan port – 2%”, the expert said.
At the same time, as the expert explained, KEBCO is sold at a premium of plus ” a couple of dollars” to Brent (the price of Brent is above 92 dollars per barrel).
“The price has increased, which is a market mechanism. Demand for KEBCO is greater than for Brent. While, the Urals, is cheaper than Brent by more than 10 dollars,” Abzal Narymbetov said.
It should be recalled that Kazakhstan exports oil mainly through two major oil pipelines: Caspian Pipeline Consortium (CPC) and Atyrau-Samara. These two routes play a key role in exports of Kazakh oil, providing its transportation to the seaports of Ust-Luga and Novorossiysk for further shipment by sea. In these pipelines oil is transported together with the Russian oil. And, whereas the CPC Blend (which predominantly contains Kazakh oil) in the CPC pipeline was not sanctioned, the Russian Urals in the Atyrau-Samara pipeline, on the contrary, became subject to a serious embargo from Western countries and much dropped in price. This factor had an adverse effect on revenues that Kazakhstan had from selling oil under the Urals brand.
Kazakhstan, on the initiative of KazMunayGas national company, decided to settle the issue by launching its own oil grade, which was named Kazakh Export Blend Crude Oil, or abbreviated to KEBCO. In this fashion, Kazakh oil was “dissociated” from Russian Urals (although they have the same characteristics) to secure it from Western sanctions.
Europe needs KEBCO
Demand for sour oil in Europe is growing, and given the sea shippings embargo and “price caps” on Russian oil, KEBCO prices are growing. As a result, Kazakh oil is now in the TOP 3 crude oils supplied to Europe.
Since January, Bulgaria, whose plant is geared for sour oil refining, is procuring the Kazakh oil. There is also a serious demand from Germany. In addition, large volumes go to the KazMunayGas refinery in Romania.
The expert is confident that Kazakhstan is now capable to meet the demand for its oil. The country’s domestic consumption is growing, though, together with the exports demand.
According to Abzal Narymbetov, new fields discovery is hindered by several factors: slow bureaucratic field development permitting process, tax burden, oil producers’ commitment to sell oil in Kazakhstan at a price 3 times lower to the market.
Best solution over 30 years
Now, after almost two years, the expert, witnessing dramatic benefits, gave a positive feed-back to the decision to launch a new brand and its disassociation from Russian Urals.
“I think it was the best solution over the last 30 years, because countries all over the world have their own oil grade. We do not associate our oil with Russian oil now, although in all components in thousandths they are the same. But what is most important, the sources of KEBCO and Urals are different. Because of this, the whole world is now buying KEBCO. In Europe, Kazakh oil is in the top 3 main oils supplied. If we still had Urals now, we would have a risk of underpriced sales”, Abzal Narymbetov concluded.
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No House Loan Guide journalist was involved in the writing and production of this article.
