September 9, 2015 / 11:35 AM / in 2 years

UPDATE 2-Kazakhstan may cut 2016 oil output if prices fall further

* Kazakhstan No. 2 ex-Soviet oil producer after Russia

* Russia may increase output by 1 pct in 2015

* Mexico will not consider output cuts for now (Updates with OPEC context)

By Raushan Nurshayeva and Mariya Gordeyeva

ASTANA/MOSCOW, Sept 9 (Reuters) - Kazakhstan could cut oil output by a tenth next year if prices drop to $30 per barrel, its energy official said, becoming one of the first big oil producers to acknowledge limits to its ability to withstand a battle for market share with OPEC.

It was not immediately clear whether the country would be forced to cut output because some production would be losing money at that price or whether it was voluntarily prepared to cut output, which is only partially controlled by the state.

Whatever the reason, the statement by Kazakhstan’s deputy energy minister will be music to the ears of OPEC, which has kept output near record levels over the past year in the hope of depressing the production of higher cost crude oil by rivals.

Last year, non-OPEC Kazakhstan produced about 1.6 million barrels a day, almost on a par with Angola, OPEC’s eight biggest producer.

Deputy Energy Minister Uzakbai Karabalin told reporters on Wednesday that if the oil price next year was $50 per barrel, Kazakhstan would produce 79 to 80 million tonnes, little changed from this year’s forecast of 80.5 million tonnes.

But if the price drops to $40, Kazakhstan’s output would be 77 million tonnes and if oil were to fall to $30, production would be cut to 73 million tonnes, Karabalin said.

Global oil prices have more than halved since last year to trade at below $50 per barrel, pressed by oversupply from OPEC and Russia, as well as a weakening China economy.

Karabalin, a former head of state energy firm KazMunaiGas, did not elaborate on how Kazakhstan would cut its output. Two industry sources said some options were cutting spending on well servicing and shutting down old wells.

Kazakhstan is the second biggest producer in the former Soviet Union, where the largest producer - Russia - has taken the opposite approach to dealing with falling crude prices.

Russian Energy Minister Alexander Novak was quoted as saying by Interfax on Wednesday that Russia might increase output by 1 percent this year from 10.6 million barrels per day in 2014.

Mexico, which like Russia and Kazakhstan is not an OPEC member, said it would also not consider cutting oil output at the moment.

KASHAGAN HOPES

Oil production in Kazakhstan has been falling as the bulk its fields are depleting. Output dropped 1.2 percent last year to 80.8 million tonnes and is expected to fall again in 2015.

The Chevron-led venture, Tengizchevroil, is Kazakhstan’s largest oil producer. Last year, its output fell 1.5 percent to 26.7 million tonnes and is expected to remain unchanged in 2015.

Kazakhstan was hoping to boost oil output, a major source of budget revenues, through the Caspian offshore Kashagan oil field, which was launched in September 2013 after a decade of delays and cost overruns.

But it halted production a few weeks later when gas leaks were detected and it is not expected to be up and running before 2017, a date confirmed by Karabalin on Wednesday.

Kazakhstan officials had expected the country to be producing between 90 million tonnes and 100 million already in 2015, thanks to Kashagan.

On Wednesday, Karabalin said the lower forecasts were not due to Kashagan’s delays: “This is not about Kashagan, but because the oil price is different now and costs are different.” (Additional reporting by Katya Golubkova in Moscow and Ana Isabel Martinez in Mexico City; writing by Katya Golubkova; editing by David Clarke)

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