Kazakhstan braces for oil output drop amid CPC terminal trouble
Production will fall by around one-fifth in April.
Kazakhstan is poised to cut back oil production by around one-fifth in April while repairs are carried out on a loading terminal at a damaged Black Sea port in Russia.
The Energy Ministry said on March 29 that daily oil output will be pegged back by 320,000 barrels, equivalent to around 50,000 tons. Last year, Kazakhstan produced 85.7 million tons of oil.
Although energy market observers are bound to link the cutback to the loading terminal incident, Kazakh officials are selling this development as a planned measure to bring the country in compliance with OPEC commitments.
Kazakhstan has been generally bullish about the potential economic fallout of trouble at the Russian Black Sea port of Novorossiysk, which is where the pipeline that the country uses to export the bulk of its oil has its terminus. On March 22, the Caspian Pipeline Consortium, or CPC, a part-Russian-owned company, said in a statement that two of three tanker loading facilities at the port had been rendered inoperable and could take weeks to repair.
At a press conference on March 25, Energy Minister Bolat Akchulakov said that Kazakhstan’s largest oil field, Kashagan, would continue production as usual and that a slowdown was only envisioned in the event of repair works on the buoy mooring devices at Novorossiysk taking longer than expected.
“If [mooring device] VPU-1 begins functioning, that is not in principle a major threat, the losses will not be so great and there will be no need to suspend work at the oil field,” Akchulakov said. “To say that Kashagan has been halted for two months, that is not correct.”
The minister added that of the buoy mooring devices at Novorossiysk, only two were in use ahead of the damage reported by CPC. The third device was a back-up, he said. On March 28, CPC said it had conducted an inspection and that two of the mooring devices would need “no less than three-four weeks” to be repaired.
For all Akchulakov’s upbeat assessment, heavy losses will be incurred. Last week, Nurlan Zhumagulov, the director of the Union of Oilfield Services Companies, a lobby group, told the state-run broadcaster Khabar 24 TV channel that the state budget could, as a result of the reported damage to CPC equipment, see a shortfall of around 500 billion tenge (more than $1 billion) over a two-month period.
And the output decline is already a confirmed fact, according to reporting by Reuters news agency. Oil production at Tengiz, a field operated by Chevron-led Tengizchevroil, on March 27 stood at 423,000 barrels, down 37 percent from the daily average over the first three weeks of the month. At Karachaganak, another field, which is operated by Karachaganak Petroleum Operating, production on the same day was recorded at 250,000 barrels, 11 percent down on the daily average earlier in the month. Kashagan, however, has retained relatively stable output.
Almaz Kumenov is an Almaty-based journalist.
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