Kazakh oil export headache worsens as Ukraine targets drone attacks at Russian Baltic ports

Ukrainian drone swarm attacks mounted on Russian Baltic ports this week have raised concerns about further risks to Kazakhstan’s oil exports.

Kazakhstan is already struggling with the consequences of previous drone assaults directed by Kyiv at the Russian Black Sea port of Novorossiysk and tankers that pick up crude from there. Approximately four-fifths of the Central Asian country’s oil shipments leave for export markets after being piped to the port by the Caspian Pipeline Consortium (CPC). However, given the attacks directed at this southern export route, Kazakhstan has increasingly relied on the northern Russian Baltic export infrastructure for part of its crude shipments.

The Ukrainian drone attacks targeted at the ports of Primorsk and Ust-Luga in Russia’s Leningrad region have led to the closure of oil and petroleum product shipment facilities at the two oil export hubs. Primorsk has an estimated capacity of around 1mn barrels per day of crude and about 300,000 barrels of diesel fuel, while both ports host large fuel storage facilities.

As of March 26, loadings at both Ust-Luga and Primorsk remained halted, with no confirmation of a return to normal operations.

The Times of Central Asia reported oil and gas journalist Oleg Chervinsky as saying Ust-Luga has been used to ship Kazakh crude marketed under the KEBCO brand, with volumes rising after earlier CPC-related challenges, which last year included attacks on CPC pipeline infrastructure.

Kazakhstan’s national pipeline operator KazTransOil transports crude through Russian infrastructure under agreements with Transneft. Oil is delivered to the Baltic ports, Germany and Black Sea terminals.

As of March 26, Kazakh officials had not commented on the Baltic drone attack incidents, but they have previously stressed the need to diversify export routes amid ongoing geopolitical risks. One option is expanding exports directed across the Caspian Sea to Azerbaijan, from where they can be piped to Turkey, but there is no trans-Caspian pipeline in place and tanker capacity is very limited, though efforts are under way to build new vessels as fast as possible.

In February, the US issued a formal warning, or demarche, to Kyiv over damage suffered by American commercial interests caused by Ukrainian attacks on CPC and Novorossiysk oil export infrastructure. Attacks on the oil shipment facilities at Novorossiysk itself appear to have dropped off, though there are still attacks on tankers sailing to, or departing, the port. On March 21, Turkey protested over a Turkish-owned vessel carrying oil picked up at Novorossiysk that was hit by a naval drone near the Bosporus strait.

Separately, Kazakhstan’s state energy company KazMunayGas said a new single-point mooring (SPM) unit for the CPC terminal in the vicinity of Novorossiysk will be delivered “shortly”, Interfax reported on March 26. It will replace one damaged beyond repair by Ukrainian drone attacks.

The terminal is responsible for about 1.5% of global oil supply.

It currently operates three SPM units, used to load crude onto tankers. Typically, two units are in active use, while the third serves as reserve capacity to ensure the continuity of operations.