Page 5 - FSUOGM Week 25

FSUOGM COMMENTARY FSUOGM

Kazakhstan’s failure to comply lies. to the 9.7mn bpd cut, suggesting that the reduc-
Kazakhstan was widely seen as having dis- tion will be eased to 7.7mn bpd at the end of this
regarded its commitments under the previous month.
OPEC+ deal, which ran for over three years until The onus is now on Kazakhstan and Iraq, as
the end of March 2020. Those cuts were agreed well as other errant producers, to convince their
in November 2016, just one month after Kasha- OPEC+ partners that they can be trusted. More
gan finally came on stream after years of delays than any other member, Iraq will need to draw
and billions of dollars in cost overruns. The gov- up a convincing plan for meeting its monthly
ernment and Kashagan’s shareholders resisted quotas.
tampering with operations at the field, to order “If OPEC+ sees that it cannot trust the mem-
to recoup some of the project’s mammoth invest- bers for the alliance, it’s not for granted that the
ments as quickly as possible. deal will be maintained,” Rystad’s Tonhaugen
Kazakhstan and Iraq have agreed to make wrote on June 22. “The production cut levels we
deeper cuts than are necessary later this year have now are unprecedented and the possibility
to compensate for their lack of compliance in of living immediately without them and flooding
May. However, the OPEC+ deal does not set out the market with oil once more [will definitely]
clearly how laggards should be punished for con- send prices sky-diving again.”
tinually failing to meet their commitments. Assuming demand remains stable and the
The global supply pact has succeeded in spur- laggards keep their commitments and win the
ring the oil market’s recovery, with Brent once trust of their partners, Rystad expects oil to rise
again trading in the lower $40s per barrel, com- to between $40 and 45 per barrel before the next
pared with under $30 in early April. The recovery OPEC+ meeting in less than four weeks.
in global fuel demand as COVID-19 lockdowns However, producers’ efforts could be coun-
are eased has done even more to push up prices. teracted by new coronavirus (COVID-19)
In their latest meeting, the OPEC+ ministerial restrictions coming into force, depending on the
panel did not recommend any further extension severity of the virus’ second wave. ™

Turkmenistan keeps believing

in pipe dream

Turkmenistan is unlikely to give up on TAPI while Berdymukhammedov is still in power

TURKMENISTAN SINCE the 1990s, Turkmenistan has seeking to widely reported at $10bn, leaving Turkmenistan
reach new markets for its natural gas by building on the hook for $8.5bn, with its partners each
WHAT: a lengthy pipeline through Afghanistan, Paki- covering $500mn. Turkmen state media claimed
Reports say the target for stan and into India. Decades on, it is still far from in the past that the Saudi-based Islamic Devel-
TAPI reaching financial delivering on that ambitious plan. opment Bank (IDB) and the Philippines-based
close has been delayed. The Turkmenistan-Afghanistan-Paki- Asian Development Bank (ADB) had offered a
stan-India (TAPI) project calls for the construc- combined $1.5bn in project financing in 2016.
WHY: tion of an 1,800-km pipeline that would export But such arrangements were never confirmed
Security concerns up to 33bn cubic metres (bcm) per year of Turk- by the banks.
continue to make men gas. Turkmenistan formed the TAPI Pipe- Several major international banks have
sourcing financing line Company (TPLC) in 2015 to manage the expressed interest as well, including Deutsche
difficult. project, ceding 5% shares each to Afghanistan, Bank, Credit Suisse and Credit Agricole, but no
Pakistan and India. firm commitments have been made.
WHAT NEXT: Under the latest schedule indicated by Turk-
Turkmenistan’s president men authorities, the project had been due to Hurdles
is extremely invested in reach financial close before the end of 2019. An obvious reason for investors’ reluctance to
the project politically, That goal was not met, though, and according to back TAPI is security concerns in Afghanistan
meaning it is unlikely to Pakistani press reports this week, is unlikely to and to a lesser extent in Pakistan. Insurgents
be dropped. be reached until 2021. Citing sources, the Kara- remain very active in the regions that the pipe-
chi-based News International said this meant the line would traverse. Another stumbling block
pipeline would not start flowing until 2023. is lingering hostility between India and Paki-
Even this may be wishful thinking by the pro- stan. The Indian government is concerned that
ject’s proponents. TAPI’s projected cost has been Islamabad might use the pipeline’s gas flows as a

Week 25 24•June•2020 www. NEWSBASE .com P5