Kazakhstan builds oil ties with Iran

Kazakhstan announced on Friday that it planned to build two oil terminals in Iran as it ramps up a lucrative oil-swap export arrangement that has been criticised for lack of transparency.

The terminals, to be built by the Kazmunaigaz and Kaznafta oil companies, will handle 1.5 million tonnes of oil annually on "profitable terms for Kazakhstan," a written statement from Kazakh Prime Minister Danial Akhmetov said.

Kazakhstan plans to ship oil from its vast Caspian Shelf reserves to supply domestic demand in densely populated northern Iran.

Iran will pay for the oil with proceeds from global sales of corresponding amounts from its own fields, which are mostly located in the south, thus saving on transport costs.

Though the system has been criticized for lacking transparency, its volumes have nonetheless steadily increased.

Kazakhstan would eventually like to dramatically increase volumes by building a pipeline through Turkmenistan to Iran, a project it has been studying with the French oil group Total.

But Washington, at odds with Iran’s government, has been promoting another pipeline that is currently under construction, the BP-led Baku-Tbilisi-Ceyhan (BTC) pipeline from the western Caspian to Turkey’s Mediterranean coast.

Officials at Akhmatov’s office and Kazmunaigaz declined to clarify the location in Iran where the terminals are to be built. The Caspian Sea — and especially Kazakhstan’s sector — is home to some of the world’s largest untapped oil reserves. It is estimated that there are up to 33 billion barrels of crude under the seabed, which is twice the size of the reserves in the North Sea.