Page 7 - AsianOil Week 01 2021

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made delinking the currency from the oil price
one of its key tenets of economic stability in the Latin America: Complicating the situation
aftermath of the 2014-2015 economic crisis. The year began with OPEC losing ground in
Russian oil producers have also had to con- Latin America. On January 1, 2020, Ecuador
tend with an overhaul in oil taxation, aimed at formally exited the group, leaving Venezuela –
extracting more budget revenue from the indus- increasingly moribund, as a result of US sanc-
try. While state oil giant Rosneft has come off tions – as the only remaining member in the
relatively unscathed, others such as Lukoil, Gaz- region.
prom Neft and Tatneft are reconsidering invest- This departure had little practical effect,
ment plans in light of the changes. partly because Ecuador had been one of the
Despite the hardships of 2020, though, smallest oil producers in the organisation and
Russia’s oil majors have proved more resilient partly because the subsequent crude price
to the downturn than many of their interna- crash made a mockery of that country’s hope of
tional peers. The country’s producers have boosting output and exports in order to increase
mostly kept their dividend policy unchanged earnings. Nevertheless, OPEC and its pricing
and some have continued buyback pro- and production policies certainly did affect the
grammes, reflecting confidence in their finan- region, as they cut into the revenues of hydrocar-
cial standing. bon-dependent states such as Mexico.
There are concerns in Moscow that Russia In turn, Mexico showed itself reluctant to
might struggle to reclaim its market share once come to the organisation’s aid after the OPEC+
OPEC+ cuts are ended. As such, the government deal lapsed at the end of March. More specifi-
is looking to provide support for the drilling of cally, it declined to accept the group’s recommen-
some 3,000 wells that will remain unfinished dations on output cuts, saying it could not afford
until the output restrictions are lifted. Russia is to rein in production. (This move led US Presi-
drawing from the practices of US shale compa- dent Donald Trump to offer to make up part of
nies, which sometimes drill but do not complete the difference.)
wells when oil prices are low, and then finish Meanwhile, the coronavirus (COVID-19)
them when prices are higher. pandemic disrupted Latin America’s oil and gas
Azerbaijan and Kazakhstan are more industry, even as infection rates soared in the
dependent on oil and gas for their economic region. It led major producers such as Brazil and
output and state finances than Russia. From Argentina to make temporary reductions in oil
an operational point of view, OPEC+ cuts have and gas yields, and these cuts, in turn, helped
forced Azerbaijan to reduce supply from its flag- to derail Argentina’s plans for becoming a net
ship Azeri-Chirag-Gunashli (ACG) oil project exporter of LNG.
in the Caspian Sea, in additional to smaller fields. It also served to complicate negotiations
Kazakhstan has imposed reductions at a number on initiatives such as the planned takeover of
of large and medium-sized oilfields, including Curaçao’s Isla refinery by Geneva-based Klesch
the giant Kashagan and Tengiz sites operated by Group. (This scheme eventually failed, when
international consortia. Klesch was unable to provide assurances about

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