Kazakhstan Export Oil Renamed KEBCO To Avoid Russia REBCO Urals Crude Mistaken Identity and Sanctions

Kazakhstan has been affected from indiscriminate fallout from Russia’s invasion of Ukraine, significantly by using Russian sea ports as a transit route for 20% of its export oil flow its oil suffers the fate of mistaken identity as Russian crude. Kazakhstan is changing the name of the oil it exports via Russian sea ports to Kazakhstan Export Blend Crude Oil (KEBCO) to dissociate it from oil originating in Russia in order to avoid sanction risks, hopefully getting better pricing and improve issues with financing.

Oil originated from Kazakhstan is technically not subject to Western sanctions, however for many it is too close for comfort and Kazakh shipments have been repeatedly mistaken for Russian barrels. Even where not, it has been getting lower prices to overcome that perception and someone say is being taken advantage by oil brokers as a threat as too difficult to touch. In 2021 this 20% was 13.3 million tonnes.

The Urals oil discount to dated Brent fell to all-time low of more than $35 per barrel from the end of March.

Urals-Brent Crude Price Spread

Oil and gas revenue accounts for 35 percent of Kazakhstani GDP and 75 percent of exports, as well as most of its foreign direct investment “It’s a necessary measure, so that our oil is not sanctioned, while its name clearly shows the country of origin in the documents. Otherwise, we have problems opening letters of credit,” a trader involved in Kazakhstan’s oil transit via Russian ports told Reuters.

The bulk of Kazakh energy is exported to and through Russia.

The Kazakh oil and gas distribution network for export is primarily spread in three different directions:

  • To the north (via the Soviet-era Russian pipeline system and rail network),
  • To the west (via the Russian-based Caspian Pipeline Consortium [CPC] and the Baku-Tbilisi-Ceyhan [BTC] oil pipeline),
  • To the east along two pipelines (via the Kazakhstan-China oil pipeline and the Central Asia-China natural gas pipeline, which transit even larger volumes of gas from Turkmenistan and Uzbekistan through Kazakhstani territory).

“Due to recent significant geopolitical changes … and to avoid negative effect of the changes on Kazakh oil exports via Russian ports, from June 2022 the following name for the grade applies – KEBCO (Kazakhstan Export Blend Crude Oil)”, Kazakh oil producer CNPC-Aktobemunaigaz that transits its oil via Russian ports said in a written answer to Reuters request.

Reuters reported that “four sources in Kazakhstan’s oil companies involved in transit via Russian sea ports also confirmed the renaming of their barrels and added that the change to KEBCO will come into effect from Monday for all official documents.”

According to one source, the Kazakhstan Energy Ministry is going to ask for authorization from the government for the official usage of the new grade.

The Energy Ministry declined to comment on the matter.

With the extended war and deepening sanctions Russian export blend crude oil (REBCO) or Urals, Russia’s flagship crude oil loading from the state’s western ports, is becoming more become difficult to place, especially with European buyers self-sanctioning by European companies. Earlier this week the European Union leaders agreed an embargo on Russian crude oil imports that will take full effect by the end of 2022. However landlocked Central European nations Hungary, Slovakia, Czech Republics secured exemptions for the pipeline imports they rely on.

Source: Reuters

From The Traders Community News Desk