(NUR-SULTAN, KAZAKHSTAN) – Oil production in Kazakhstan has fallen sharply after the closure of a Black Sea export terminal that was recently targeted by drone strikes. Two industry sources told Reuters on Thursday that output dropped significantly, with the steepest reduction recorded at the Tengiz field, the country’s largest oil deposit.
The Tengiz field, operated by the American company Chevron, saw production cut by more than half. One source said output fell to roughly 406,000 barrels per day on Wednesday, compared with an average of 925,000 barrels per day in July.
Total production of oil and gas condensate across Kazakhstan slipped to 1.63 million barrels per day on Wednesday, down from a July average of 2.07 million barrels per day, according to a second source.
The immediate cause of the drop is the halt in operations at the Caspian Pipeline Consortium terminal on the Russian Black Sea coast. The CPC terminal stopped loading oil on Monday after attacks on oil tankers in the area.
The CPC pipeline system carries more than 80 percent of Kazakhstan’s oil exports, making it the single most important route for the country’s crude to reach international markets. The pipeline accounts for nearly 2 percent of global oil supply, so any prolonged stoppage carries weight far beyond Central Asia.
Russia has blamed Ukraine for the attacks on the CPC tankers. Ukraine, which has stepped up strikes on Russian energy infrastructure in recent months, has not commented on these particular incidents.
The terminal is physically located in Russia, but the oil flowing through it belongs overwhelmingly to Kazakhstan. This places Kazakh exports in a vulnerable position, caught in a conflict that does not directly involve the country itself.
The loss of export capacity has forced producers to scale back output. With the CPC terminal unable to accept fresh deliveries, oil has nowhere to go. Storage capacity at fields and along the pipeline route is limited, meaning production must be cut until the export route reopens. The Tengiz field is particularly exposed because of its high output volume and its reliance on the CPC pipeline to reach global buyers.
The disruption adds to wider anxiety about the stability of global oil markets. The conflict involving Iran has already interfered with supplies from Saudi Arabia and other Gulf states.
Now the partial loss of Kazakh volumes, representing almost 2 percent of world supply, introduces a further element of unpredictability. Buyers in Europe and Asia, who depend on CPC Blend crude as a medium sour grade for their refineries, face the prospect of tighter physical markets.
For Kazakhstan, the economic stakes are considerable. Oil exports are a central pillar of state revenue. A sustained reduction in export volumes would place pressure on the national budget and the tenge.
The Kazakh currency has previously shown sensitivity to oil price swings, and a supply side shock originating within the country’s own borders would likely test that relationship again. At current market rates, the loss of roughly 440,000 barrels per day of exports at a Brent price of approximately USD 85 per barrel represents daily foregone revenue of about USD 37.4 million, equivalent to around GBP 29.4 million. Calculated in local currency, that daily figure stands at roughly 17.5 billion tenge.
The situation also highlights the geographic constraints facing Kazakhstan as a landlocked producer. The country has limited options for redirecting crude flows away from the CPC route.
Alternative pipelines crossing Russia or heading east towards China do not have the spare capacity to absorb a sudden surge of Tengiz volumes. Rail and barge alternatives are more expensive and logistically complex. This leaves Kazakh producers dependent on a swift resolution at the Black Sea terminal.
Chevron and other international partners in the Tengiz consortium are monitoring the security situation closely. The field has been undergoing a major expansion project designed to lift output well above current levels.
Any extended period of forced production cuts would delay the ramp up and affect the economics of that investment. The presence of major Western oil companies in Kazakhstan means the disruption also carries implications for international energy investors.
The drone attacks on tankers represent a new dimension in the targeting of energy infrastructure. Unlike pipeline damage, which can take weeks or months to repair, the threat to moving vessels creates immediate operational paralysis.
Shipping companies become reluctant to send their tankers into waters where they could become targets. Insurance costs rise sharply, making each voyage more expensive. These secondary effects can keep a terminal closed even after the physical damage has been contained.
The global oil market is now balancing multiple supply threats simultaneously. Kazakh volumes are only one component, but the market is tight enough that the removal of any significant barrel stream affects price discovery.
Refiners in the Mediterranean and Northwest Europe, who are regular buyers of CPC Blend, may need to seek alternative grades from the Atlantic Basin, adding to freight costs and bidding up prompt prices.
The Kazakh government has not publicly stated how long it expects the terminal to remain offline. Much depends on the security assessment made by vessel operators and their insurers. Until tankers can load safely, the CPC pipeline will remain in a state of effective paralysis, and Kazakh oil will stay in the ground.
