Russia to expand its oil exports to China via Kazakhstan by 40%

Russia and Kazakhstan have signed a new protocol for the bilateral agreement on oil transit to China. Under the document, Russia will boost its oil exports to China through Kazakhstan’s territory from 7 million tons of oil to 10 million tons per year. This figure was secured in the document from the very start.

For its oil exports, Russia uses the Tuymazy-Omsk-Novosibirsk pipeline (TON-2) that stretches through Priirtyshsk and Atasu in Kazakhstan to Alashankou in China. Under the agreement, Kazakhstan will be able to supply about one million tons of oil and gas condensate to its petrochemical plant in Pavlodar via Russian territory. These will be shipped via the Atyrau-Samara pipeline and then via the TON-2 pipeline and Priirtyshsk to the oil refinery.

The two sides have also added a new paragraph to the agreement that says that tariffs for oil transit can be adjusted for inflation yearly. At the same time, these tariffs can’t be higher than tariffs set for non-transit oil transporting.

According to the agreement between Kazakhstan and Russia on Kazakhstani oil exports, in 2023, Kazakhstan was supposed to export 73 million tons of oil through Russia including 15 million tons via the Atyrau-Samara pipeline, 54 million tons via the Caspian Pipeline Consortium (CPC) and 4 million tons via the Makhachkala-Novorossiysk pipeline.

In turn, Russia was supposed to send 25 million tons of oil through Kazakhstan by transit, including 15 million tons via the CPC (from the Kropotkin and Komsomolskaya oil fields) and 10 million tons via the TON-2 and the Omsk – Priirtyshsk – Atasu – Alashankou pipeline.

In December 2023, KazTransOil, a subsidiary of KazMunayGas responsible for transporting oil, announced that the transit tariff for the Kazakhstani part of the TON-2 would be increased for the first time since April 1, 2018, from $9.33 for one ton per 1,000 kilometers to $11.28 (VAT excluded) or by 20.9%.

«Starting from January 1, 2024, the tariff for KazTransOil services related to transporting oil via the Kazakhstani part of the TON-2 through the territory of the Republic of Kazakhstan by transit will be at $11.28 for one ton per 1,000 kilometers (VAT excluded). The new tariff has been approved by the order of the director general of KazTransOil,» the company said in a statement.

The TON-2 pipeline stretches through both Russia and Kazakhstan. The Kazakhstani part of the pipeline is 186.25 kilometers long; it is used for oil supply for the Pavlodar refinery and Russian oil transit to China and Uzbekistan.

On May 15, 2023, KazTransOil announced that the ten million tons oil transit agreement with Russian Rosneft via Kazakhstan to China was extended until 2034 with a current tariff of $15 per ton. Russian oil follows the route across the border of the Russian Federation to the border of the Republic of Kazakhstan (Priirtyshsk) to Atasu (Kazakhstan) and then to Alashankou (China).

The Atasu-Alashankou pipeline with a capacity of 20 million tons of oil per year is part of the Kazakhstan-China oil pipeline system controlled by Kazakhstan-China Pipeline LLP, which is a joint venture by KazTransOil (50%) and China National Oil and Gas Exploration and Development Company Ltd. (50 %).