Page 5 - FSUOGM Week 18

FSUOGM COMMENTARY FSUOGM
Baseline output
Agreed cut
Percentage cut
Algeria
1057
241
-23%
Angola
1528
348
-23%
Congo
325
74
-23%
Equatorial Guinea
127
29
-23%
Gabon
187
43
-23%
Iraq
4653
1061
-23%
Kuwait
2809
641
-23%
Nigeria
1829
417
-23%
Saudi Arabia
11000
2508
-23%
UAE
3168
722
-23%
Azerbaijan
718
164
-23%
Bahrain
205
47
-23%
Brunei
102
23
-23%
Kazakhstan
1709
390
-23%
Malaysia
595
136
-23%
Mexico
1753
100
-6%
Oman
883
201
-23%
Russia
11000
2508
-23%
Sudan
75
17
-23%
South Sudan
130
30
-23%
OPEC 10
26683
6084
-23%
Non-OPEC
17170
3616
-21%
OPEC+
43853
9700
-22%
Table showing OPEC+ cuts in May and
June. Iran, Libya and Venezuela are also members of OPEC
but are not involved
in the agreement on cuts, as they have already reduced their production substantially.
Shah Deniz gas eld will be una ected.
It is undergoing an expansion that is anticipated
*Iran, Libya and Venezuela are also members of OPEC but are not involved in the agreement on cuts, as they have already r
Kazakhstan
Kazakhstan has not disclosed a breakdown of how it intends to implement cuts.
e country is required to cap its supply at 1.32mn bpd in May and June – 390,000 bpd below the baseline in October 2018. Its energy ministry said on May 1 that production would be reduced at certain giant, large and medium-sized oil elds, without naming any particular elds.
In a statement, the ministry said it had used a “non-discriminatory approach to all produc- ers ... taking into account the fair distribution of output reduction quotas between both large projects and mature oil elds whose output is in natural decline.”
Well over half of Kazakh oil production comes from the Karachaganak, Kashagan and Tengiz elds. Sources told Reuters in late April that the government was near to reaching agree- ments with the consortia developing Tengiz and Kashagan to cut their output by 22% in May. However, the Chevron-led group behind Tengiz told Platts on May 4 that the eld was still pro- ducing “to plan” despite the OPEC+ restrictions.
As is the case in Azerbaijan, this would mark the rst time that these major projects have been involved in a cut. Kashagan nally entered pro- duction in autumn 2016, a er a decade and a half of delays and cost overruns.
Cuts at Kashagan would undermine its oper- ators’ efforts to recoup the project’s massive investments, estimated at above $60bn. Output at the eld has also been volatile owing to its complex geological characteristics. Its operators may therefore struggle to regulate ow rates at a certain level.
Tengiz is Kazakhstan’s biggest oil producer, with an output of 675,000 bpd in the rst quarter.
to li production to over 780,000 bpd by 2023. By that point the OPEC+ accord will have long expired and therefore should not have an impact on the project.
However, delays could result from steep reductions in capex announced this year by Chevron and Tengiz’s other investors.
Russia
Russia has agreed to cut output to under 8.5mn bpd this month from a baseline of 11mn bpd. The cut is actually deeper than this, as Rus- sian supply has recently been averaging above 11.3mn bpd. In the nal days of April producers ramped up extraction to as high as 11.35mn bpd.
ere has been wrangling between produc- ers and the government in recent weeks over how that signi cant reduction will be achieved. However, the energy ministry has insisted on a pro-rata reduction that all producers will take in, including those working under produc- tion-sharing agreements (PSAs) in the Far East.
Russia has stressed its commitment to enforc- ing the cuts. But its track record so far in OPEC+ compliance is less than stellar. The country repeatedly surpassed its agreed quota last year, initially blaming its failure on the harsh climate and geological conditions of many oil-producing regions that made sharp reductions di cult to implement. Later it cited its lack of control over output at PSA projects, involving the likes of ExxonMobil and Royal Dutch Shell.
If Russia does not abide by the new restric- tions, this would sow renewed distrust with Saudi Arabia, and the entire OPEC+ deal could collapse. This would derail the market’s slow recovery from OPEC+ lockdowns, putting even more pressure on global storage and triggering another price rout. ™
Week 18 06•May•2020 w w w . N E W S B A S E . c o m P5
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