Kazakhstan will prioritise national interests over those of the OPEC+ group when deciding on oil production levels, the country’s newly appointed Energy Minister Erlan Akkenzhenov told Reuters, ratcheting up the standoff with the group.
Several other members of the OPEC+ group, including top producer Saudi Arabia, have been angered by Kazakhstan’s rising output, three OPEC+ sources told Reuters last month.
The minister said, however, the country was unable to reduce oil production at its three large oil-producing projects given they were controlled by foreign majors, especially at the Tengiz oilfield, led by U.S. oil major Chevron.
“To act in accordance with national interests. This is a broad formulation, but it completely covers the entire situation that we have now. Act only in accordance with national interests,” the minister said.
Kazakhstan, which pumps around 2% of global oil, reported a 3% decrease in oil output in the first two weeks of April from the March average but it still exceeded the OPEC+ quota it has pledged to meet after months of overproduction.
Kashagan and Karachaganak, Kazakhstan’s two other large upstream projects, are also operated by Western oil majors.
OPEC+ members’ compliance with their individual output targets under the collective output agreement has worsened over the past year.
Kazakhstan, one of top 10 global oil producers, is extracting oil at a record rate and well above its target, as agreed with the Organization of the Petroleum Exporting Countries and its allies led by Russia, after Chevron finished a major expansion on the Tengiz oilfield.
Akkenzhenov said that while his government would hold talks with the Western majors to improve its compliance with the OPEC+ quotas, it did not hold much sway over them.
“We can’t. We don’t control these processes there. Because our international colleagues make the decisions,” Akkenzhenov, who was appointed last month, said.
“The increase in production comes only from new deposits… If we start to shut down old deposits, it will be a shot in the foot.”
He said Kazakhstan risked losing mature oilfields entirely if it started reducing output there. According to the minister, the three projects account for 70% of oil produced in Kazakhstan.
The Central Asian state has pledged to compensate for overproduction by reducing oil output through to June 2026.
The minister stopped short of saying Kazakhstan would leave OPEC+, but reiterated that it had to take national concerns into account.
“We will try to adjust our actions. If our partners … are not satisfied with the adjustment of our actions, then again we will act in accordance with national interests with all the ensuing consequences,” he said.
Kashagan project is operated by the North Caspian Operating Company (NCOC) that includes Eni with 16.81% stake, and Shell among the stakeholders. Kazakhstan’s KazMunayGaz has a 16.88% stake.
Karachaganak gas-condensate field is controlled by a group which also includes Eni and Shell with 29.25% stakes each, while KazMunayGaz has 10%.
In the Chevron-led Tengizchevroil (TCO) consortium, which operates the Tengiz and Korolev fields, Chevron holds a 50% stake, while KazMunayGaz has 20%, Exxon 25% and Lukoil 5%.
Turning to exports, Akkenzhenov said Kazakhstan expected to meet its plans of exporting 55 million metric tons of oil this year, or 1.2 million barrels per day, via the CPC pipeline that links the country’s oilfields with Russian Black Sea terminals from which crude gets shipped to various destinations, including Turkey and China.
The pipeline, operated by a consortium that includes Chevron and ExxonMobil, accounts for some 80% of Kazakhstan’s oil exports. Akkehzhenov said that while it will undergo maintenance in the second half of May, stockpiles at the Russian port of Novorossiisk will ensure loadings will remain unaffected.
Kazakhstan also seeks to boost oil exports via Russia’s Druzhba pipeline to Germany and was able to raise it to over 2.5 million tons per year, though it would depend on Moscow’s agreement, the minister said.
Source: Reuters