Economic Cooperation Strengthens as Kashagan Oil Flows Through BTC
The State Oil Company of Azerbaijan (SOCAR) has commenced the transit of crude oil from Kazakhstan’s Kashagan field through the strategically vital Baku-Tbilisi-Ceyhan (BTC) pipeline. This marks a significant development in regional energy cooperation and signals an increasing reliance on the BTC as a major export route for Central Asian crude.
On January 25, the first batch of Kashagan oil, approximately 6,000 tons, was loaded onto a tanker at Kazakhstan’s Aktau port. The shipment arrived at the Sangachal terminal in Azerbaijan on January 27 before being transported via BTC to the Turkish port of Ceyhan. The transportation process is being facilitated by the Taraz tanker, operated by Kazakhstan’s KazMorTransFlot. This initiative follows the signing of an agreement on January 15, 2025, between SOCAR Midstream Operations LLC and KazMunayGaz’s (KMG) subsidiary, KMG Trading, securing the transit of 240,000 tons of Kashagan oil annually.
This development is part of a broader strategy to increase Kazakh oil transit through Azerbaijan. In March 2024, SOCAR and KMG agreed to expand oil supply volumes through Azerbaijan’s territory, aiming for a gradual increase to 2.2 million tons per year. This builds upon a previous agreement from November 2022, which enabled the transit of 1.5 million tons of oil annually from Kazakhstan’s Tengiz field.
Strategic and Economic Implications
Bolstering Energy Security and Diversification
The commencement of Kashagan oil transportation through BTC underscores Kazakhstan’s efforts to diversify its energy export routes, reducing reliance on traditional Russian transit corridors. Given ongoing geopolitical uncertainties and Western sanctions on Russian energy infrastructure, Kazakhstan is actively seeking alternative pathways to maintain stable oil exports. Azerbaijan, leveraging its geographical position and well-developed transit infrastructure, emerges as a crucial partner in this diversification effort.
For Azerbaijan, increased transit of Kazakh oil translates to greater utilization of the BTC pipeline, enhancing its role as a critical energy hub between the Caspian region and global markets. The growing transit volumes also contribute to Azerbaijan’s transit revenue and reinforce its strategic importance in the Eurasian energy landscape.
Economic Impact and Corporate Strategies
From an economic standpoint, the increasing throughput of Kazakh oil via BTC benefits multiple stakeholders. SOCAR, as the operator of BTC, stands to gain from rising transit fees and a strengthened market position in global oil logistics. Meanwhile, KazMunayGaz (KMG) is set to enhance its export flexibility, reducing transportation risks associated with reliance on the Caspian Pipeline Consortium (CPC), which routes oil through Russian territory.
Additionally, the increasing transit volume bolsters the commercial viability of the Middle Corridor, also known as the Trans-Caspian International Transport Route (TITR). The route, which links China to Europe via Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, and Turkey, is gaining traction as a key component of regional connectivity and trade. The Kazakh government has reported a 62% surge in TITR cargo volumes to 4.5 million tons in 2024, with further expansion planned through infrastructure enhancements and regulatory streamlining.
Regional Cooperation and Infrastructure Development
Kazakhstan and Georgia are actively collaborating to optimize oil and petroleum product transit to international markets. During a recent meeting in Astana, Kazakh Prime Minister Oljas Bektenov and Georgian Prime Minister Irakli Kobakhidze emphasized the need for competitive tariffs, streamlined logistics, and increased cargo volumes along BTC and TITR corridors.
Kazakhstan has committed to further developing its port and terminal infrastructure, removing administrative barriers, and fostering favorable conditions for logistics companies. These measures align with its broader strategy to strengthen connectivity with Europe and the Middle East via Azerbaijan and Turkey.
What’s Next?
Looking ahead, Kazakhstan’s push for greater oil export flexibility is expected to drive continued investment in alternative transit routes. As BTC’s importance rises, Azerbaijan may seek additional partnerships with Central Asian producers to further cement its role as a premier transit hub. Meanwhile, investments in TITR’s capacity expansion, projected to reach 10 million tons per year by 2027, will create new opportunities for regional energy and trade flows.
Quick Insights:
- Kazakhstan’s Kashagan oil begins transit via Azerbaijan’s BTC pipeline, marking a shift in regional energy flows.
- SOCAR and KMG agreements aim to boost Kazakh oil transit to 2.2 million tons annually.
- The Middle Corridor (TITR) gains momentum as Kazakhstan increases cargo volumes by 62%.
- Azerbaijan solidifies its role as a key energy transit hub, benefiting from rising BTC utilization.
- Kazakhstan invests in infrastructure to enhance oil and trade connectivity with Europe.
This evolving energy partnership highlights the increasing strategic and economic interdependence between Kazakhstan and Azerbaijan, with BTC and TITR serving as crucial arteries for Eurasian oil and trade logistics.
