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Kazakhstan is in talks with the companies operating its two large oil projects to reduce total output by 22 percent in compliance with the latest OPEC+ production cut agreement.
The Central Asian country’s cut quota under the OPEC+ deal was 390,000 bpd, from a total daily production of some 1.7 million bpd, to 1.3 million bpd, most it coming from the Tengiz field onshore and the Kashagan field in the Caspian Sea, which last year accounted for a combined daily output of 900,000 barrels of crude.
The situation is sort of unique since the consortia operating Tengiz and Kashagan are led by a supermajor. The majority partner in Tengizchevroil, which operates the Tengiz field, is U.S. Supermajors Shell, Total, and Exxon are partners in the North Caspian Operating Company, developing Kashagan. Until now, the two companies have not been involved in production cuts. This time, however, they were not just asked but were about to agree, according to Reuters sources.
Kazakhstan is not alone in this unprecedented position of negotiating production cuts with private field operators. Neighbour Azerbaijan with whom the country shares the Caspian Sea’s oil riches, asked the BP-led consortium that operates the Azeri-Chirag-Guneshli offshore field system to start reducing its output from May. Last year, the ACG group produced some 542,000 bpd. Now, BP and its partners would need to reduce this by between 75,000 bpd and 80,000 bpd to fill the country’s reduction quota, which stands at 164,000 bpd.
OPEC and its partners, which besides Russia also include the Central Asian oil producers, agreed early this month to reduce its combined production by 9.7 million bpd to counter a dramatic drop in oil prices. The amount to be cut, however, is nowhere near the loss of demand resulting from travel banks and lockdowns in response to the coronavirus pandemic, suggesting that along with deliberate cuts, there will be a lot of forced well shut-ins as barrels produced remain unsold and with storage space running scarce on a global scale.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.