It is essential for the oil-rich Kazakhstan to ensure the progressive development of the export capacity in all the major export routes, as well as to secure transportation of oil and petroleum products to domestic markets. In order to provide oil transportation services and to operate the country’s oil pipeline network the Government of Kazakhstan established the National Oil Transportation Company KazTransOil (KTO) in 1997, which in 2002 became a specialized subsidiary of KazMunaiGas. Therefore, it can be inferred that KTO is a national monopoly, which has been granted an ownership of the largest network of main oil pipelines with a total length of 5,502,997 kilometers and waterlines with a total length of 2,148,100 kilometers. As the largest oil pipeline company in Kazakhstan, KTO ensured oil transportation by 37 oil pumping stations, 64 oil preheaters, and tank farms for oil storage with a total capacity of 1,259,000 cubic meters. Moreover, oil transshipment is performed by 4 loading-unloading railroad docks, oil loading facilities installed on 5 piers of the oil loading terminal in the Aktau seaport, as well as oil loading facilities installed in the Batumi seaport. (KazTransOil, 2016)
Aimed at providing the oil-flow redistribution between the domestic market and export routes KTO is focused on upgrading the existing system of main pipelines and developing new projects to diversify oil supplies, especially, in western and eastern directions. Since its establishment, KTO have replaced more than 1,000 kilometers of the main oil pipelines and renewed over 60% of tank farms. Moreover, the company invested in construction of the new domestic pipelines, namely, the Alibekmola- Kenkiyak and the North Buzachi-Karazhanbas. In September 2016, KTO reported that the overhaul of the Kazakh section of the major oil pipeline Tuimazy-Omsk-Novosibirsk-2 (TON-2) was completed giving an opportunity to increase its transit potential from 7 million tons of oil to 10 million tons of oil per year. (East Time, 2016)
It should be specified that since Kazakhstan entered into the active implementation phase of its export diversification strategy in the 2000s, KTO has not had the full ownership of a number of export pipelines commissioned that time, namely, the Caspian Pipeline Consortium (CPC) or the Tengiz-Novorossyisk pipeline that exports oil to the European market via Russia, the Atasu-Alashankou pipeline that exports the Kazakh and Russian oil to China and the Kenkiyak-Atyrau pipeline, which is used for domestic oil transportation. (KAZENERGY, 2015) These pipelines are owned by the Consortium of investors, in which KTO is a shareholder. For instance, to date, the company is a shareholder of the following legal entities with foreign participation: (a) the Kazakhstan-China Pipeline (KCP), which owns the Atasu-Alashankou and the Kenkiyak-Kumkol oil pipelines on parity basis with the China National Oil and Gas Exploration and Development Corporation; (b) MunaiTas, which owns the Kenkiyak-Atyrau oil pipeline, shareholders of which are KazTransOil (51%) and the China National Petroleum Corporation (49%).
Figure 1. Oil export routes from Kazakhstan
Source: IHS Energy, EOEO
As it shown in Figure 2, KTO established partnership relations with Russia in relation to the Kazakh oil transportation. Kazakhstan and Russia agreed to jointly use a number of oil pipelines for oil transportation. For instance, the transit of the Russian oil to China via the Kazakhstani oil pipeline network in the amount of 7 million tons per year started since January 2014. The parties agreed to provide the Russian oil supplies via the Omsk-Priirtyshsk-Atasu-Alashankou route. Actually, the reconstruction of the TON-2 pipeline paved the way to increase transportation of both the Kazakh oil to the Pavlodar Petrochemical Plant and the Russian oil to China through the territory of Kazakhstan. Moreover, since December 2015, the sides launched the Kazakh oil shipment to the country’s refineries via the route passing through the Russian territory, namely, via the Atyrau-Samara-TON-2- Priirtyshsk-Kazakhstani oil refineries route.
However, it should be mentioned that despite the fact that KTO owns the main oil pipeline network in the country it was engaged in transportation of approximately 56% of produced crude oil in Kazakhstan in 2016. Actually, such low figures could be explained by the fact that the volume of oil transshipment made by KTO via the CPC pipeline amounted to over 3 million tons in 2016, while in early January 2017 it was reported that in total 44.3 million tons of the Kazakh oil were exported via the CPC pipeline in 2016. However, it should be mentioned that the amount of oil transported by KTO via the CPC pipeline in 2016 increased by 0.244 million tons compared to 2.779 million tons of oil in 2015.
According to the 2016 operational results, KTO continued to experience a decrease in the oil transportation and transshipment turnover, which reduced from 50.033 million tons in 2014 to 47.541 million tons and 43.797 million tons in 2015 and 2016, respectively. As shown in Figure 2, further decrease was also indicated in the consolidated volume of oil transportation and oil and petroleum products transshipment, which declined from 64 million tons in 2014, to 61 million tons and 56.575 million tons in 2015 and 2016, respectively. (KASE, 2016)
Moreover, the most dramatic decrease in oil transportation was recorded on the Atasu-Alashankou pipeline route. The total amount of oil shipped via the Atasu-Alashankou pipeline reduced by 1.726 million tons from 11.794 million tons in 2015 to 10.068 million tons in 2016. Furthermore, the volume of oil transportation via the Atyrau-Samara pipeline declined from 15.702 million tons in 2015 to 15.024 million tons in 2016. The Aktau and Batumi seaports experienced further decrease in the oil transshipment by tankers. The total amount of oil shipped by tankers via the Caspian Sea declined to 2.196 million tons in 2016 compared to 2.881 million tons in 2015, while oil and petroleum products transshipment via the Black Sea reduced to 3.377 million tons in 2016 compared to 3.616 million tons in 2015. However, it should be admitted that the volume of the Russian oil transported via the Kazakhstani section of the TON-2 pipeline increased to 7.654 million tons in 2016 compared to 6.969 million tons in 2015. (KazTransOil, 2017)
Figure 3. Oil turnover by KTO (million tons)
It could be concluded that since the lion’s share of the revenues of KazTransOil include crude oil transportation (83%) and oil reloading and railway shipment (7%), it could be expected that in 2016 the national operator of oil pipelines will face the decline in revenues. However, taking into account the fact that according to the Energy Ministry’s forecasts, Kazakhstan will increase the oil output from 78 million tons in 2016 to over 80-82 million tons in 2017, KazTransOil could significantly improve its operational results next year.
East Time. (2016). Repairs Of The Kazakh Section Of TON-2 Completed.
KASE. (2016). “KazTransOil” JSC informs about 12 months of 2015 operational results.
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KAZENERGY. (2015). The National Energy Report. 2015: Astana.
KazTransOil. (2016). General information about KazTransOil.
Retrieved from http://www.kaztransoil.kz/en/about_the_company/
KazTransOil. (2017). “KazTransOil” JSC informs about operational results for 12 months of 2016.
 KTO’s pipeline network includes 71.7 kilometers length Kenkiyak-Orsk oil pipeline, which passes through the territory of Russia.
 KTO controls the assets in the Batumi Oil Terminal LLC, as well as exercises exclusive management rights on 100% of shares of the Batumi Sea Port LLC.
 Worth recalling, the major oil pipeline TON-2 was built and commissioned in 1959. It passes through the territory of both Russia and Kazakhstan. The total length of the Kazakh section of the TON-2 is 185.6 kilometers. The total cost of the project exceeded 32 billion tenge.
 Kazakhstan and Russia signed an agreement on cooperation in the sphere of transportation of the Russian oil to China through Kazakhstan on December 24, 2013.
Note: The views expressed in this blog are the author's own and do not necessarily reflect the Institute's editorial policy.