Kazakhstan Set to Drift Away from OPEC Deal
Kazakhstan is, as expected, bracing to drift away from its role in the OPEC oil production cap in the coming two months.
Energy Minister Kanat Bozumbayev said at an industry conference in Istanbul over the weekend that Kazakhstan’s withdrawal from its pledge to the cap will take place gradually, Russian news agency TASS reported.
Last November, members of OPEC and other oil-producing nations thrashed out an agreement to collectively reduce their daily output by 1.8 million barrels as compared to production in late 2016. The same countries later agreed to extend the deadline for that cap to March 2018 in a desperate bid to prop up prices.
Asked if Kazakhstan would be prepared to consider a further extension during OPEC talks in November, Bozumbayev was evasive, answering only that “this is a question for November.”
But the data on Kazakhstan so far shows Astana never really had its heart in it, and Bozumbayev even admitted the country’s oil output for 2017 will outshoot the previous projected volume of 81 million tons (around 578 million barrels).
Quite how strictly Kazakhstan has abided by its OPEC obligations depends what and how one is counting. In March, an International Energy Agency report suggested that far from cutting output by 20,000 barrels daily, as pledged, Kazakhstan had actually jacked up output.
“Kazakh crude and condensate production rose by nearly 40 [thousand barrels a day, or kb/d] in February to average 1.718 [million barrels a day], according to the latest official data. The increase stemmed mostly from Kashagan, which produced 170 kb/d last month, only five months after start up,” the agency said.
Extrapolating unscientifically from those IEA figures, the 81 million ton projection will be easily surpassed.
Bozumbayev said that Kazakhstan was respecting the OPEC limits and that discrepancies were due to differing methodologies adopted by Astana and the IEA.
That Kazakhstan was less than eager became particularly clear in May, when Bozumbayev declared that the 20,000 barrel pledge would come up for review in September.
“I told my colleagues [at the OPEC summit in Vienna], and that is mainly the energy ministers of Saudi Arabia and Russia, that in September our oil production will increase because we have Kashagan,” he said at the time. “So we are changing our production schedule. That is, we agreed that when Kashagan grows, we will amend our obligations, and they agreed to that. They eased our conditions.”