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Kazakhs, Turkmen Head To OPEC Meeting With Own Aims

Kazakhstan is reportedly not keen on the timing of the cuts, as its massive Caspian offshore field, Kashagan, has just started producing oil.
Kazakhstan is reportedly not keen on the timing of the cuts, as its massive Caspian offshore field, Kashagan, has just started producing oil.

Kazakhstan and Turkmenistan are sending representatives to Vienna on May 24-25 for a meeting of OPEC and non-OPEC oil exporters. (They are, of course, in the latter group.)

The meeting will consider further production cuts to try to boost the price of oil on world markets.

Both Astana and Ashgabat would also enjoy seeing the price of oil rise, but their envoys will come to the meeting with significantly different positions.

Energy Minister Kanat Bozumbaev confirmed on May 15 that Kazakhs would attend the Vienna meeting. Astana was represented at a similar meeting in December 2016 at which the group first agreed to cut production. Bozumbaev said at that time that Kazakhstan would reduce oil output by 20,000 barrels a day (bbl/d) from its average of some 1.5 million bbl/d.

But Kazakhstan reportedly was not keen on the timing of the cuts.

After more than a decade of delays, Kazakhstan's massive Caspian offshore field, Kashagan, had just started producing oil in the summer of 2016, and Bozumbaev indicated Kashagan would be excluded from any production cuts.

Kazakh authorities were relying on volumes from Kashagan to compensate for the drastic fall in oil prices, which played a huge role in the economic problems Kazakhstan experienced in 2016.

Bozumbaev said on the eve of the December 2016 meeting that Kazakhstan planned for oil production to reach 85 million tons, nearly 10 million tons more than 2016 (though still the figure for output for 2014).

In his May 15 announcement that Kazakhstan would attend the Vienna meeting, Bozumbaev said, "We will hold talks...[on] the role Kazakhstan will play in this agreement [for further oil cuts]." But he warned Kazakhstan would not "automatically" join decisions OPEC or other exporters made.

Interestingly, on May 16, Kazakh news agency Kazinform reported that under a recently approved expansion plan for Kazakhstan's Tengiz oil field, Kazakhstan's largest onshore field, production would reach some 850,000 bbl/d -- an increase of some 260,000 bbl/d compared to current output -- and total some 39 million tons per year.

It appears Turkmenistan is sending representatives to the May meeting in Vienna, Reuters reported on May 11, citing OPEC sources.

Turkmenistan did not send anyone to the December meeting, but Reuters' sources in OPEC seemed certain Turkmen representatives would be at the meeting and would back additional cuts to oil production.

That might not mean much, since Turkmenistan only produces some 250,000 bbl/d. To put that into perspective, Saudi Arabia produces some 10 million barrels per day even after the agreeing to cut some 500,000 bbl/d.

Turkmenistan is a natural-gas producer, and since the price of gas on world markets follows the price of oil, Turkmenistan stands to gain if oil prices increase.

That would be one reason for Ashgabat to show its support for cuts in oil production.

But there is possibly another reason. Turkmenistan has been desperately seeking investors for its planned gas-pipeline projects so the country can export more of its gas.

Ashgabat has reached out, unsuccessfully, to Saudi Arabia, even to Qatar, itself a gas producer, looking for funding for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline.

Ashgabat assumed responsibility for coming up with 85 percent of the money for the estimated $10 billion TAPI project, and reports from Turkmenistan over the last year show the country is in no financial condition to pay that money on its own.

Turkmen authorities might be thinking there could be some quid pro quo here, and offer up support for oil cuts in the hope that one or more of the oil-exporting countries might be interested in helping finance a Turkmen export pipeline project.

So Kazakhstan goes with tepid enthusiasm for further production cuts, knowing the country will not go along with reductions much longer, whereas Turkmenistan goes with really nothing to lose and possibly something to gain by agreeing to anything the oil-exporting countries wish to do.

The views expressed in this blog post do not necessarily reflect those of RFE/RL