The Chevron-led consortium that operates Kazakhstan's largest oil field, Tengiz, is imposing production cuts in line with government legislation covering May-June and is not yet aware of additional restrictions for July, it said June 19.
In production since 1993, Tengiz is the mainstay of Kazakhstan's crude production and the CPC export blend loaded on the Black Sea coast. It accounts for 40% of Kazakh oil production, with output of 667,000 b/d in the first quarter. A major coronavirus outbreak at the site by the Caspian Sea has disrupted a $46.5-billion expansion project expected to lift output to 900,000 b/d in 2023.
Kazakhstan has acknowledged a failure to fulfil production cuts agreed in April among the OPEC+ group of countries in response to collapsing demand and global oversupply. On June 18, the country's energy ministry said over-supply in the first 12 days of May had amounted to 3.13 million barrels, resulting from "industry inertia," and would be compensated through additional cuts in August and September.
S&P Global Platts estimates Kazakhstan's production was 160,000 b/d above its quota of 1.319 million b/d over the full month. The country told an OPEC+ monitoring meeting this week it would cut an extra 15,000 b/d in July and 50,000 b/d in August and September.
In emailed comments, Chevron said the TCO consortium was playing its part in production cuts, although it gave no indication of plans beyond June, following an agreement by the OPEC+ group to extend the first phase of cuts, totaling 9.7 million b/d, into July.
"TCO, as a law-abiding company, is following the Republic of Kazakhstan's government decree imposing oil production limitations in May and June and is not currently aware of additional legislative action. We remain focused on safe and reliable operations and continuously strive to meet the expectations of our shareholders," Chevron said, adding it was "generally TCO's policy not to comment on commercial matters."
A provisional program for CPC crude loadings for July suggests a sizable increase from June to 1.31 million b/d. This is close to Kazakhstan's production quota for May and June, however, not all CPC crude is produced in Kazakhstan, about 10% being from Russian oil fields in the northwest portion of the Caspian Sea.
The OPEC+ agreement in any case only covers crude oil, and not condensate, sizeable volumes of which supplement crude oil in the CPC crude stream. Kazakhstan's third largest hydrocarbon field, Karachaganak, is primarily a gas and condensate field, with liquids output of around 220,000 b/d in 2019.
TCO said this month that work on the Tengiz expansion project, known as the Future Growth Project-Wellhead Pressure Management Project, was now 77% complete, and it was "taking actions to safely execute the projects key critical-path activities."
Chevron, which is a 50% shareholder in TCO, has cut its capital spending plans for this year by almost a third, indicating that Tengiz will account for a significant portion of the savings.
The other shareholders are ExxonMobil, on 25%, state-owned KazMunaiGaz on 20% and Lukoil subsidiary LukArco on 5%.
