Kazakhstan’s Oil Production Is Surging Despite Pledges to Cut 

(Bloomberg) -- Kazakhstan’s oil production is setting new daily records after maintenance works were completed at the country’s three big oil fields. Barring unforeseen issues, the Central Asian nation’s output looks set to stay well above its OPEC+ quota under an output deal that runs to the end of March.

Daily production hit an all-time high of 269,000 tons on Thursday. When converted to barrels, the volume is far in excess of what the nation pledged it would pump to help OPEC and allied oil producers avert a global glut.

All three of Kazakhstan’s big oil projects - Tengiz, Kashagan and Karachaganak -- are now running near full capacity after maintenance work, contributing more than 60% of the country’s oil output. Elevated production levels over the coming winter would undermine Kazakhstan’s compliance with an output target it agreed under the latest OPEC+ deal, which is due to run to the end of March.

“I think it’s sustainable to produce to these levels for the first half of 2020 and potentially even longer,” said Alex Kavouris, senior analyst at global energy consultancy FGE. “Kazakhstan has a reputation for not really abiding to the quotas.”

Rather than focus on day-by-day compliance, the country will point to its average level of production over the entire period from January 2019 to March 2020. Maintaining yesterday’s record output rate for the next five months would still leave that average about 10,000 barrels a day below the target.

Thursday’s output equated to 2.05 million barrels when converting tons into barrels by using crude-density figures from individual fields. By a measure that OPEC+ used to calculate starting points for a pact to curb supplies, Thursday’s production worked out at 1.96 million barrels. Either would be an all-time high.

The country’s compliance with the first OPEC+ deal, which ran for two years from January 2017, was poor. But a new, higher starting point for the second deal, which reflected the start-up of the Kashagan field, helped Kazakhstan achieve better compliance this year -- aided by deep cuts for maintenance at Kashagan in April and May.

All of the big projects export most of their crude and condensate through the CPC pipeline to the Black Sea. Exports of CPC Blend for November are set at 5.87 million tons, or more than 1.5 million barrels a day.

The jump in Kazakhstan’s exports coincides with the first oil from Norway’s giant Johan Sverdrup field, where output could reach 200,000 barrels a day by the end of the year. “An increase in production at the moment is bearish for the market, for prices, given that demand is quite sluggish," Kavouris said of the higher CPC flows.

--With assistance from Nariman Gizitdinov.

To contact the reporters on this story: Julian Lee in London at jlee1627@bloomberg.net;Olivia Konotey-Ahulu in London at okonoteyahul@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net, John Deane

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