Kazakhstan's Tengiz crude field producing 'to plan' despite OPEC+ agreement

London — The operator of Kazakhstan's giant Tengiz oil field, a consortium led by Chevron, continues to produce "to plan," it said Monday, despite expectations the country will cut its overall production as part of agreements with OPEC+ producer nations.

Kazakhstan agreed to join in production cuts last month under a plan by OPEC+ nations led by Russia and Saudi Arabia to reduce output by 9.7 million b/d in May and June, with further cuts through to next April, in order to stabilise oil markets.

In a statement Friday, Kazakhstan's energy ministry said production cuts totalling 390,000 b/d in May and June were being initiated, encompassing "medium, large and giant" fields, and would be fairly apportioned, taking account of the needs of the domestic fuels market.

In production since 1993, Tengiz is the biggest contributor to the CPC crude blend, which loads at Novorossiisk on Russia's Black Sea coast, but mainly comprises Kazakh crude oil. The field produced 675,000 b/d of oil in the first quarter 2020, up from a full-year average of nearly 650,000 b/d last year, helping lift CPC crude loadings to a record-high 1.65 million b/d in March.

Chevron, which holds a 50% stake in the Tengizchevroil consortium, said last week it expected to curb its production globally by 200,000-300,000 b/d of oil equivalent in May, split roughly 50:50 between its US operations and countries involved in OPEC+ cuts, but gave no breakdown by country.

However, in an emailed comment Monday, TCO gave no indication of cuts taking place.

"TCO is aware of public reports stating the Republic of Kazakhstan's intention to curtail oil production from producing fields within Kazakhstan. However, at this time, TCO is focused on safe and reliable operations and continues to produce according to the business plan approved by the company's shareholders," it said.

CPC crude prices have hit rock-bottom levels in recent weeks, with the grade trading at a $10/b discount to Dated Brent on a CIF Augusta basis at one point in mid-April and falling to an outright price of $6.34/b on an FOB Novorossiisk basis on April 21.

When Kazakhstan first joined in OPEC+ production cuts in 2016 it indicated output curbs would be focused mainly on mature, inland fields that do not feed the CPC crude stream, and generally played down the practical impact.

However, Friday's statement from the ministry suggested cuts could impinge more seriously on major fields such as Tengiz, Kashagan and Karachaganak, at least in the short term.

TCO is aware of public reports stating the Republic of Kazakhstan's intention to curtail oil production from producing fields within Kazakhstan. However, at this time, TCO is focused on safe and reliable operations and continues to produce according to the business plan approved by the company's Shareholders.