Kazakhstan will shut down production at its giant Kashagan field to comply with production cuts agreed by OPEC and its partners in December.
S&P Global Platts quoted the country's energy minister, Kanat Bozumbayev, as saying "Output there is currently between 300,000 and 350,000 b/d, so it will be a significant cut, almost 200,000 b/d. We expect that in April and May we will have a low output level, then in June it will pick up and so our average output for the six months will be less than 1.8 million b/d."
A cut of 200,000 bpd would be equal to what Russia agreed to remove from its daily production rate as part of the deal with OPEC. It is also a substantial portion of Kazakhstan's overall production, which in February stood at 1.893 million bpd.
Kashagan is one of the world's largest offshore oil fields, with reserves of 13 billion barrels of crude and in-place resources of as much as 38 billion barrels. Its development has been challenging, mainly because of climatic and geological peculiarities, and because of cost overruns that saw the final budget swell more than double on the initial US$20 billion to US$50 billion, but the field eventually came online in 2013. There have been plans to bring the field's production rate to half a million barrels daily.
It's worth noting Kazakhstan's minister apparently does not envisage a future in which the OPEC+ cuts stretch for longer than six months while his Saudi counterpart said at the meeting in Baku that they might need to be extended not just beyond April but beyond June as well.
OPEC and its partners led by Russia agreed to cut 1.2 million bpd from global supply to push prices higher. However, rising U.S. production has interfered with their plans for a quick rise in prices. In fact, now Saudi Arabia's Khalid al-Falih is saying the world's supplies of crude are rising despite U.S. sanctions against Venezuela and Iran, which is why the cuts may have to be extended.
By Irina Slav for Oilprice.com
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