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Politics to blame in fall of oil prices - Kazakh expert

Oil&Gas Materials 30 January 2015 20:42 (UTC +04:00)
Political mechanisms have affected the situation with the fall in world oil prices.
Politics to blame in fall of oil prices - Kazakh expert

Baku, Azerbaijan, Jan.30

By Elena Kosolapova - Trend:

Political mechanisms have affected the situation with the fall in world oil prices, said senior analyst of the agency for research of profitability of investments of Kazakhstan Murat Abulgazin.

"Due to the actions and positions of the US and Saudi Arabia, which are really "running the show" on the global oil and gas market in the areas of policy and energy, and the fact that each of them pursues its goals, such a sharp decline took place," Abulgazin told Trend Jan.30.

He said that the world oil prices may continue to fall and reach the mark of $40 per barrel. Countries of the world cannot do anything, because market mechanisms are involved, which are based on speculative attitudes and expectations, he said.

Abulgazin said that low oil prices create challenges for the oil sector of Kazakhstan.

The expert said that the Vice-Minister of Energy of Kazakhstan Uzakbay Karabalin made a statement that the prime cost of oil production in the country is quite high and averages about $50 per barrel.

Abulgazin said that this amount probably includes transportation costs as well.

"The problem is that among the producing fields in Kazakhstan there are old ones, for example, Uzen and Emba, which have low pressure and high production costs. Therefore, the prime cost of oil is higher," he said.

However, he said that the prime cost at such large fields as Tengiz and Karachaganak is lower.
"Regarding the possible closure of certain fields and other anti-crisis steps, the government holds all the cards," the expert said.

He reminded that Kazakhstan's government representatives have repeatedly said that they have plans for functioning of the economy even with oil prices at $40 per barrel. Oil is the most important source of the budget's currency replenishment.

As part of this anti-crisis measures, Kazakh president instructed the government to use the funds of the National Fund which are mainly formed with the revenues from oil sale. Moreover, it was ordered to reduce the spending on certain fields, he said.

The expert said that the measures of economizing taken in this situation are quite natural and justified.

"We all in Kazakhstan, CIS countries and in the world should be able to economize in difficult times," said the expert.

This is while the probability of the price hike by late 2015, in connection with the emergence of new and expansion of existing military political conflicts in the world is considered, said the expert.

World oil prices have dropped from almost $110 per barrel to below $50 in recent months and the prices continue declining. The revenues from oil sale are the main income source of Kazakhstan.

Edited by CN

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Follow the author on Twitter: @E_Kosolapova

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