* Kazakhstan links Caspian Sea with pipelines to China
* Oil from giant Kashagan field may flow both East and West
* Kazakh deliveries to China to rise by fifth in 2013
* Rosneft also considers supplying China through Kazakhstan
By Alla Afanasyeva and Gleb Gorodyankin
MOSCOW, March 7 Kazakhstan is reversing the flow
of oil in pipelines east to ramp up sales to China, from west
through Russia to Europe, dealing a blow to Moscow in its battle
with Beijing for control of Central Asian energy resources.
Russia previously lost its grip over billions of dollars of
natural gas flows from neighbouring Turkmenistan, when the
country diverted production to China and Iran.
In Kazakhstan, the shift in oil routes comes before an
expected jump in output later this year, when production starts
at one of the world's largest fields, Kashagan, by a group of
major oil companies including Exxon Mobil and Royal
"The European market is saturated, so it is better for them
to divert oil to China ... Especially given that the shale
revolution (in the United States) will divert oil from the
Middle East, Africa and Latin America to Europe," said Valery
Nesterov, an analyst at top Russian bank Sberbank.
"Asia remains the only promising market," Nesterov said.
Russia, the world's largest oil producer, has been the main
transit route for crude from Kazakhstan since the collapse of
the Soviet Union, taking flows of around 300,000 barrels per day
through Transneft, Russia's state-controlled
CPC, a private Chevron-led consortium, also has been
exporting some 600,000 bpd of Kazakh crude via Russia over the
past decade to the Mediterranean markets.
Oil volumes piped by CPC and Transneft were expected to
double later this decade after Kazakhstan launches Kashagan. But
that is far from certain now as China, the world's largest
energy user, increases its imports.
"The plans remain just plans; there is no progress so far,"
Transneft spokesman Igor Demin said when asked about plans to
increase the capacity of the 300,000 bpd Atyrau-Samara pipeline.
China first imported large volumes of oil from Kazakhstan in
2005, when it built the 965 km (600 miles) Atasu-Alashankou
pipeline to bring 200,000 bpd from fields in central Kazakhstan
to China's northwest.
Since then volumes have remained largely unchanged, but
changes in Kazakhstan's pipeline system point to a big rise in
flows towards China in the future.
Three years ago Atasu was connected to the Kenkiyak hub of
fields in western Kazakhstan with 1,100 km (680 miles) of
pipelines, effectively crossing the entire vast central Asian
This year, Kazakhstan reversed flows along the existing 450
km (280 miles) link from Kenkiyak to the Caspian port of Atyrau
to pump oil east instead of west.
That means that a pipeline that used to transit oil from
fields in the country's center towards Russia and the Caspian
Sea can now take flows in the opposite direction all the way to
the Chinese border.
Industry sources say that, thanks to the reversal, flows to
China are due to rise by 20 percent this year to some 240,000
This was effectively confirmed by January data from
Kazakhstan's oil and gas ministry, which showed a spike in
In the long term, Chinese imports will double and could rise
at an steeper pace should new projects such as Kashagan decide
to use the route for export.
"We are considering all options to evacuate oil from
Kashagan, including Alashankou," an official at the Kashagan
consortium said on condition of anonymity because he is not
allowed to speak to the press.
Kashagan has focused mainly on European oil export options.
The field should produce 300,000 starting from 2013, gradually
rising to around 1 million bpd. Besides Exxon and Shell, the
group's members include Kazmunaigaz, Eni, Total
, ConocoPhillips, and Inpex.
Rising Kazakh shipments to China will reduce the revenue of
Russia's Transneft, which needs to generate healthy profits to
complete its own ambitious projects such as a new link to the
The bad news doesn't stop there as the rapid expansion of
Kazakh pipelines encourages Russian producers to divert some
volumes away from Europe towards China through Kazakhstan.
Industry sources told Reuters last month Russia's top oil
producer Rosneft wants to raise billions of dollars
from China in loans guaranteed by oil deliveries.
Rosneft is offering a combination of routes, which could
include increased deliveries through an existing pipeline from
Russia, from a Russian Pacific port as well as extra deliveries
via Kazakh pipelines.
The plan caused dismay at Transneft, which says it will lose
$180 million in annual revenues if 100,000-140,000 bpd of
Russian oil is diverted to China through Kazakhstan.
"This will be a straight direct loss to us," Transneft's
boss Nikolai Tokarev said last month. "Maybe oil firms will
benefit, but the idea is problematic."
(Writing by Denis Pshenichnikov; editing by Dmitry Zhdannikov
and Jane Baird)