On February 23, the Russian Ministry of Energy officially stated that it had shut off a portion of a pipeline due to an accident, an emergency measure that stopped gas flows to neighboring Kazakhstan, just as temperatures dropped again below freezing in the Central Asian country.
The explosion at the Orenburg-Novopskov pipeline section – which runs along the Soviet-era Soyuz pipeline – led to a drastic reduction of gas supplies from Russia to the West Kazakhstan region. While gas-rich, the West Kazakhstan region’s pipeline system is structured in a way that renders it dependent on Russian gas supplies.
Russia and Kazakhstan share the longest continuous border in the world, spanning 7,600 kilometers. Electricity and pipeline networks, as well as railroads and highways, intersect the border several times, because this infrastructure was mostly built during Soviet times, when the border was a mere administrative demarcation.
The Orenburg-Novopskov pipeline is a section of the Soyuz pipeline system, opened in 1980, which brings Siberian gas to Ukraine and further to Europe. However, according to the Russian Ministry of Energy, gas supplies along the Soyuz were not affected by the incident.
Kazakhstan sends gas from the Karachaganak gas and condensate field in the West Kazakhstan region to the Orenburg processing plant in Russia and re-imports it ready for consumption via the Orenburg-Novopskov pipeline. Due to the disruption, local state utility companies had to use their own gas reserves to make up for the lost inflow. According to the government, Russia resumed gas supplies to Kazakhstan the following day via alternative routes, as workers repaired the damaged section.
The linkages in the energy sector of Russia and Kazakhstan could lead to positive results, such as the transit route through Kazakhstan for Russian oil directed to China, pending the construction of a direct pipeline. Dependency on this transit route, however, proved counterproductive in January 2020, when contaminated oil led to a flow stoppage, which was only restored in March.
Another important connection is the Uzen-Atyrau-Samara oil pipeline, which pumps Kazakh oil from the Mangystau and Atyrau regions to Russia’s Volga region and then further westward. In January, a severe frost caused a blackout near Atyrau, which in turn led to a temporary halt of oil flows. The pipeline is the second-largest export route for Kazakhstan’s oil, after the Caspian Pipeline Consortium (CPC), which is jointly operated by the Russian and Kazakhstani governments and private oil companies.
Due to the ongoing COVID-19 pandemic, oil and gas pipelines originating from Kazakhstan have suffered a reduction in throughput. In 2020, the CPC pumped 59 million tons of oil, a 6.5 percent reduction compared to 2019.
As Kazakhstan continues to be dependent on the hard currency it earns with the export of oil and gas, in addition to the taxes paid by oil and gas companies, an uninterrupted flow of hydrocarbons is crucial to maintain the precarious financial equilibrium of the country’s budget.
Weather adversity and aging infrastructure are part of a trend that will render Soviet-era pipelines increasingly unreliable and obsolete. This will push producers to focus on private ventures, such as the CPC, through which most of Kazakhstan’s oil is exported.
While still grappling with the consequences that the COVID-19 pandemic had on global demand for oil, Kazakhstan is faced with a need to rethink its links to its export markets.