Nur-Sultan Excepts Changes To Its Oil Quotas After Failure Of OPEC Deal

Kazakhstan’s Energy Ministry announced that the government is not planning to make any changes to the country’s oil output quotas as part of a global deal after Russia and the Organization of the Petroleum Exporting Countries (OPEC) failed to reach an agreement. 

‘‘We have a plan for 2020 and we will stick to this plan,’’ energy minister Nurlan Nogayev said at a government gathering on Tuesday, according to a report by Sputnik Kazakhstan.

‘‘No increase or cutback in production is planned.’’

Earlier this year, prime minister Askar Mamin has announced that the country was planning to produce 90 million tons of oil and 56.5 billion cubic meters of natural gas in 2020.

Kazakhstan is ranked the world’s ninth-largest crude oil exporter and holds three percent of the world’s total oil reserves, placing it in the number 11 globally and making it the third-largest oil producer in the Caspian region, after Russia and Iran. In an attempt to boost global oil prices, Kazakhstan and other non-OPEC countries like Azerbaijan and Russia agreed to reduce output for six months beginning January 1, 2017 — extendable for another six months. 

In early March, Russia received a demand from OPEC officials to further cut production due to the coronavirus outbreak that hit the global economy. Moscow has rejected the demand, which caused the end of the three-year partnership between OPEC and major non-OPEC providers, amidst growing oil production in the United States and Washington’s pressure on Russia’s energy industry via tough sanctions.

Officials in Nur-Sultan believe the deal is of great significance for oil-rich Kazakhstan. 

‘‘The deal has always been in [our] favor. Time will tell what action will be taken by OPEC,’’ said minister Nogayev.

Meanwhile, it seems Russia is not going to accept the OPEC’s demand. At a meeting with the country’s leading oil companies on March 1, President Vladimir Putin said the government was satisfied with the current oil prices, while the country’s reserves would allow it to fulfill “budgetary and social obligations” even if the situation worsened.

To convince Russia to stay in the agreement, Saudi Arabia — the world’s leading oil producer and exporter — has absorbed a disproportionate amount of the cuts. On March 7, after Russia refused to cut production, Riyadh notified its buyers that the country would raise output and discount its oil prices in April. This prompted a Brent crude price crash of more than 30 percent and led to a widespread turmoil in financial markets.

“The price war on the global energy market exacerbates the perspectives for the global economy, which is already under pressure due to the coronavirus outbreak,’’ said Yerbolat Dosayev, the head of the Kazakhstan National Bank. 

‘‘The Organization for Economic Cooperation and Development predicts a decline in global GDP growth down to 1.5 percent in 2020, if the negative impact drags on,’’ he added. 

The government in Nur-Sultan believes the current turmoil may negatively affect the demand for Kazakhstan’s energy exports, which as a result could lead to a deterioration in the country’s balance of payments.

Kazakhstan’s national currency, the tenge, has dramatically lost its value this week slumping somewhere between 382 and 393.5 tenges per US dollar. 

To mitigate the effects of the drop in oil prices, Kazakhstan’s authorities created an operational response headquarters led by the prime minister. The office is expected to develop an anti-crisis action plan. While addressing the government, President Kassym-Jomart Tokayev said there was a need to reduce budget expenditures, ensure employment in the regions, stabilize the country’s monetary and financial market, and optimize the republican and local budgets.