Oil production can fall in Kazakhstan, due to decrease in oil prices

Astana, Kazakhstan, Jan. 16

By Daniar Mukhtarov - Trend:

Oil production can fall in Kazakhstan this year, due to the decrease in oil prices, Sergey Smirnov, the analyst focusing on oil and gas sector, told Trend.

He believes that the decline in world oil prices will force many oil companies operating in Kazakhstan, to revise their production and investment plans.

"With an average oil cost of $50 per barrel in the country, the oil companies' profit at current oil prices will be minimal," Smirnov said. "Naturally, companies will start revising their budgets and adjust them downward."

"First of all, the investment programs will be cut down, including those of KazMunaiGas Exploration Production (a production subsidiary of Kazakhstan's national oil company KazMunaiGas), aimed at supplementary exploration and upgrading oil production to preserve the operating wells, the recovery of which in case of their closing until better times can be even more expensive," the expert said.

He recalled that on the Mangyshlak Peninsula in the west of Kazakhstan there are a lot of "old" fields, where the oil production costs almost $80.

"That's to say, in such a situation when the world oil prices have dropped to $47 per barrel and the prices for 'black gold' will unlikely rise in the next two years, according to experts' forecasts, small oil producing companies in the country can go bankrupt and shut down," he said. "So, the decrease in the oil production volume in 2015 is not ruled out."

Kazakh Energy Ministry told Trend that the decision on the plans for oil production will be made by the oil producing companies themselves with any world prices for crude oil.

The ministry said that this decision will be made by taking into account various economic and production factors.

Kazakhstan's oil and gas industry, which is the integral part of the world energy sphere, can face various challenges that may affect various aspects of development, according to the Energy Ministry.

"World prices for energy resources, which are subject to high volatility, are among the key risks," the ministry said.

Oil is produced at over 200 fields in Kazakhstan, which are at various stages of development and are characterized by different prime costs for oil, said the ministry.

The oil production volume in Kazakhstan totaled 80.85 million metric tons as of 2014, which is less than in 2013.

Edited by SI

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