Page 15 - FSUOGM Week 11

FSUOGM
FSUOGM
balance its books in the wake of the oil price crash brought about by disagreements between Russia and Saudi Arabia on curbing oil production.
According to IMF data, Azerbaijan needs an oil price of around $53 per barrel to balance its budget.
In 2019, Azerbaijan increased pensions and other social services to ease the pain of inflation and address rising discontent. At
the time, President Ilham Aliyev said the spending would be met by reforms made
to the tax system. Some of those funds
would come from higher customs revenues, consumer spending (via a value-added tax), and an expected uptick in tourist arrivals, noted OilPrice.com. Yet these returns are now expected to fall because of the coronavirus epidemic, according to Gubad Ibadoglu,
a senior analyst at the Economic Research Center in Baku and an assistant professor of economics at Rutgers University, as cited by the media outlet.
Given that the government fears unrest, “it is impossible to cut social payments, which are almost 65 percent of the state budget,” Ibadoglu was cited as saying. “The only way [to save] is to cut the investment budget
and the defence budget. It’s not easy to cut the defence budget [...] and the investment budget was already smaller [in 2020] than last year.”
After the last oil crash, in 2014, Azerbaijan devalued the manat twice. This time around, Ibadoglu anticipates that Baku will manage
a softer slide in the value of the manat by spending hard currency reserves but foresaw a run on banks when they opened March 10 after a holiday weekend. “Nobody trusts the banking sector after the two devaluations,” he was further cited as saying. He also calculated that the central bank only has reserves to manage the manat for a few months.
March 11 2020
Kazakh gas supplies to
Chinaatsimilarleveltolast
year despite 20-25% cut
Despite cutting gas supplies to China by 20-25%, Kazakhstan’s gas export levels to China remain at the same level as last year, Energy Minister Nurlan Nogayev said on March 11. Kazakhstan shipped 7.5bn cubic metres (bcm) of gas to China in 2019 and was set to boost shipments to 10 bcm a year. The cut in supplies this year came after importer PetroChina issued a force majeure notice to gas suppliers in March.
PetroChina has suspended imports of liquefied natural gas shipments and some of the gas imported via pipelines amid a seasonal plunge in gas demand along with falling consumption due to the coronavirus pandemic.
Kazakhstan also suspended oil exports to China in mid-January. Oil exports have not yet resumed as organic chloride continues
to be detected in crude produced by CNPC Aktobemunaigas, a local subsidiary of the Chinese CNPC, according to Nogayev
“As soon as we deal with these issues, we will renew (oil) supplies to China, resources permitting,” Nogayev said.
March 13 2020
CPC shareholders
reportedly in standoff after
boarddissolution
The Caspian Pipeline Consortium (CPC) pipeline is undergoing a shareholder standoff following the dissolving of the company’s board, three anonymous sources have told Reuters.
The CPC is the largest privately-operated oil transit route connecting Kazakh and Russian fields with the Black Sea. The pipeline ships 1.4mn of light Caspian barrels per day (bpd)
to Mediterranean markets. The CPC is in need of adding another 150,000 bpd by 2024 to accommodate the region’s growing oil output.
The standoff between shareholders may potentially harm further expansion plans.
Disagreements between Kazakhstan, Russia’s oil pipeline monopoly Transneft and other shareholders of the CPC have limited expansion plans in the past.
March 18 2020
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