MOSCOW (Reuters) - Kazakhstan is close to a deal with the big international oil companies that operate at its Tengiz and Kashagan oilfields to cut output by 22% from May to help the country meet commitments to a global supply pact, sources familiar with the matter said.
OPEC and allies including Russia and Kazakhstan have agreed to a record cut in output to reduce an unprecedented global supply glut as lockdowns to tackle the coronavirus pandemic ravage demand.
Kazakhstan has agreed to cut 390,000 barrels per day (bpd) of its output to roughly 1.3 million bpd, the state’s energy ministry has said.
The central Asian country plans to reduce its overall oil output by 22-23% from the average level of production in the first quarter, and has asked oil producers to cut output accordingly, two sources familiar with the details said.
Tengizchevroil (TCO), which operates the Tengiz field and is led by U.S. oil group Chevron, and the Kashagan field, operated by the North Caspian Operating Company (NCOC), have not been asked to take part in previous output curbing deals.
But this time the size of the cuts are impossible to achieve without the participation of foreign investors.
The two sources said both projects were close to agreeing to the reductions in output.
Kazakhstan’s energy ministry declined to comment.
Chevron, which speaks for TCO, said it was “focused on safe and reliable operations and continues to produce according to the business plan approved by the company’s shareholders.”
NCOC said it “strictly adheres to the North Caspian Sea Product Sharing Agreement and any applicable laws”.
Combined production of the Tengiz and Kashagan fields was nearly 900,000 bpd in 2019, accounting for more than a half of Kazakhstan’s oil output.
The fields supply all of their oil to the CPC pipeline and export it as CPC Blend crude. That means the production cuts will have a direct impact on CPC Blend exports in May, the sources said.
The preliminary May loading plan for CPC Blend was set at 5.73 million tonnes. Traders expect this to be revised much lower.
The Kashagan consortium includes Eni, ExxonMobil, CNPC, Royal Dutch Shell, Total, Inpex and Kazakh state energy firm KazMunayGaz.
TCO is owned by Chevron, ExxonMobil, Russia’s LUKOIL and KazMunayGaz.
Additional reporting by Gleb Gorodyankin and Olzhas Auyezov; Editing by Simon Webb and Rosalba O’Brien
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