Page 15 - FSUOGM Week 19 2020

FSUOGM POLICY FSUOGM
Kazakhstan signs decree on output cuts
KAZAKHSTAN
The Tengiz and Kashagan field was expected to be affected.
THE Kazakh government signed a decree on May 11 to cut oil output starting from May in line with a deal agreed in April by OPEC and non- OPEC oil producing nations, Reuters reported, citing four anonymous sources familiar with the matter.
Kazakhstan’s energy ministry said on May 1 that the Central Asian nation was reducing pro- duction at certain giant, large and medium sized oil fields to meet the country’s commitments under the OPEC+ deal on global output cuts. None of the fields concerned were specified, but the Tengiz and Kashagan fields are the country’s biggest producers. Reuters reported previously, citing anonymous sources, that Kazakhstan was in talks with operating companies to reduce pro- duction at the two fields by 22%. The two fields along with the Karachaganak field are operated by groups of major international energy firms. Kazakhstan has pledged to cut its oil production by 390,000 barrels per day (bpd) in May and June.
The oil production cuts under the govern- ment’s new decree were calculated individually
for each producer. The calculation relies on a for- mula based on daily oil output and export levels during the first quarter of 2020, the sources said, citing the document.
The production cuts will heavily impact Kazakhstan’s flagship export oil grade CPC Blend, three of the sources said. CPC Blend loading plan for May, however, was only slightly revised down to 5.5mn tonnes, down from 5.73mn tonnes.
The Chevron-led Tengizchevroil (TCO), which operates the Tengiz field, and the North Caspian Operating Company (NCOC), which operates the Kashagan field, have not in the past been asked to take part in output-curbing deals. This time, however, the cuts required cannot be achieved without foreign investors’ participation. The fields supply all of their oil to the CPC pipeline and export it as CPC Blend crude.
The combined output of the Tengiz and Kashagan fields stood at around 900,000 bpd in 2019, accounting for more than half of Kazakh- stan’s oil production. ™
Bulgaria aims to boost tax control over Lukoil-owned fuel supplier
BULGARIA
Lukoil has threatened to shut down depots if the changes are introduced.
BULGARIA’S parliament on May 8 backed increased tax controls over the country’s big- gest fuel supplier, owned by Russia’s Lukoil. The move is aimed at boosting budget revenues, which have shrunk amid the state of emer- gency declared in response to the coronavirus (COVID-19) pandemic.
Under the changes, due to receive final approval this week, Lukoil Bulgaria will have one month to apply to register its six fuel depots and a 400-km fuel pipeline running from its Nefto- chim Burgas oil refinery as separate tax entities. At present all these assets are considered by the customs office as a single fuel depot.
Finance Minister Vladislav Goranov said the changes would improve transparency and ensure the proper collection of excise duties from fuel sales.
Lukoil Bulgaria, which also operates more than 220 filling stations in the country, has warned it may suspend operations if lawmakers bring the new proposals into force.
“Given the deadlines, the amount of work required and the practical impossibility of
meeting them, the danger of stopping work is real,” Lukoil Bulgaria’s director-general Bulat Subaev told public radio station BNR on May 8. “Revenues in the budget do not depend on how many tax warehouses our infrastructure will be divided into – nothing will be added to the Treas- ury from the division itself. And secondly – this will entail huge investments and administrative costs.”
The Bulgarian Petroleum and Gas Associa- tion also opposes the changes, noting that they were not discussed with representatives of the sector and would require significant investments for companies to comply with them. This is at a time when fuel suppliers are already struggling because of the loss of sales as a result of COVID- 19 travel restrictions.
“Not all warehouses will be able to implement the projects on time. Some of the warehouses may close, filling stations will be supplied from a more distant location. Tolls and transport costs will increase, and this will likely be reflected in the fuel prices,” the association’s president, Zhi- vodar Terziev, told BNR. ™
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