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Kazakhstan refines its oil strategy
Reliance on hydrocarbons is increasing. While the government talks about diversification the reality is much greater emphasis and visible progress in expanding oil and gas activities. Kashagan output rising steadily. The country produced an average of 1.73 mln barrels of oil per day last year, up by 10.5% from 2016. Most of that extra oil came from the Kashagan field, which finally started producing in late 2016 and will soon plateau at 370,000 barrels per day. Total Kazakhstan production is set to reach at least 2.15 mbpd by 2023. Kazakhstan is out of the OPEC deal.
Will politics, disruptions and the dollar continue to drive oil? – February 2018
OPEC-Russia deal created a favorable backdrop The price of Brent fell 16% in the first half of 2017 but rallied 40% through the second half. The continuation of the OPEC-Russia deal plus steadily rising demand, created a favorable backdrop but it was the combination of several other factors which created the price catalyst.
Russian Oil Sector Overview: Nothing so Crude
Output has grown despite sanctions and low oil price. In August 2014, the average daily output was 10.84 million barrels. At last November’s pre-OPEC deal peak, the daily average was 11.58 million barrels.
Better cooperation with OPEC. Russia has cut 210,000 bbl/day of the 300,000 bbl/day agreed with OPEC. The oil majors, initially opposed to the deal, now support an extension into 2018. The oil sector is earning $2.25 bln p/m more at $54/bbl than it would if oil averaged $45/bbl.
The ruble collapse saved the oil sector. Costs are largely in rubles while revenues remained in US dollars. Sanctions and the lower oil price also pushed oil companies to reduce costs and improve operational efficiency.
Government is trying to reduce oil vulnerability. The government’s Fiscal Plan aims to reduce reliance, and vulnerability, to oil. The target is to cut the breakeven oil price to $40/bbl by 2020 and to reduce oil & gas taxes to 35% of the budget total. In 2013, the budget needed $115/bbl to balance and oil & gas taxes exceed 50% of the total.
Tax changes. Tax changes in the sector are inevitable, despite the strong opposition from the powerful oil lobby.
Oil Update October 2016
The World Energy Congress is currently taking place in Istanbul (10-13 October). President Putin is expected to attend the opening day session and is expected to give verbal support to the notion of an oil production freeze. This may provide some additional short-term oil price support. But Russia will not/cannot commit to a reduction in oil output. Neither will the Iranians and most other OPEC producers. That burden can only fall to the Saudi and, to a lesser extent, the UAE and Kuwait. In reality, the notion of a cut mostly shouldered by Saudi Arabia is a non-starter while a production freeze can, at best, only support the price of Brent at around US$50 per barrel. That is because any higher price will see the return of some of the 500,000 barrels of US shale oil which has been cut since late last year and make it easier for Iran to attract some of the billions of dollars it now needs to boost oil output further.