Oil - The Times Of Central Asia

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Oil

Kazakhstan to Offset Oil Overproduction in 2024

Kazakhstan has pledged to compensate for excess oil production in 2024, reaffirming its commitment to the OPEC+ agreements. At the 58th meeting of the Joint Ministerial Monitoring Committee, Kazakh representatives confirmed the country's readiness to take necessary measures in 2025 and 2026 to meet its obligations under the OPEC+ framework. "Despite increased production this year due to the expansion of the Tengiz field, Kazakhstan remains committed to the OPEC+ agreement and will engage in negotiations with partners in accordance with international law," the Ministry of Energy stated. OPEC+ Efforts to Stabilize the Market The February 3 meeting marked the first OPEC+ gathering of 2025. Participating ministers emphasized that voluntary production cuts, implemented by several member states in December 2024, have contributed to oil market stability. Previously, on December 5, 2024, OPEC+ agreed to extend voluntary oil production limits of 2.2 million barrels per day (bpd) for the first quarter of 2025. The decision was made in response to a seasonal slowdown in demand during the winter months. A gradual easing of restrictions is expected to continue until September 2026. The next OPEC+ monitoring committee meeting is scheduled for April 5.

Oil

National Bank of Kazakhstan Predicts Higher 2025 Oil Prices Than Bank of America

The National Bank of Kazakhstan (NBK) has revised its forecast for 2025 oil prices, lowering the projected cost from $82.5 to $70 per barrel. Despite this adjustment, the NBK remains more optimistic than Bank of America, which recently reduced its 2025 oil price forecast to $65 per barrel. Bank of America’s Forecast Initially, Bank of America analysts projected Brent oil prices at $80 per barrel for 2025, aligning closely with the NBK's earlier forecast of $82.5. However, last week, Francisco Blanch, head of global commodities and derivatives research at Bank of America, announced a significant revision, citing oversupply and reduced demand driven by the global shift toward cleaner energy sources and transportation. The new forecast sets oil prices at $65 per barrel. NBK’s Adjusted Outlook In its updated Monetary Policy Report, the NBK revised its oil price forecast for 2025 to $70 per barrel, compared to an average of $80.3 in 2024. The adjustment reflects weaker anticipated demand from China and OECD countries, coupled with slower global economic growth. The NBK noted that "the relaxation of production restrictions by OPEC+ countries starting in 2025, alongside increased output from North and South America, will likely create a supply surplus in the oil market." External Influences The U.S. presidential election results could also impact global oil dynamics. President-elect Donald Trump and his administration have pledged to sharply increase domestic oil production beginning in January 2025, aiming to reduce petroleum prices. Additionally, Trump has suggested a potential withdrawal from the Paris Climate Agreement, which could further incentivize support for U.S. oil companies. For Kazakhstan, declining oil prices present significant fiscal challenges. According to the Ministry of Finance, the country collected 655.2 billion KZT ($1.2 billion) in mineral extraction tax (MET) from oil companies during the first 11 months of 2024. Oil export revenues contributed approximately 2 trillion KZT ($3.8 billion), bringing total budget revenues from the oil sector to over 2.3 trillion KZT ($4.4 billion) this year. The potential reduction in oil prices could, therefore, have a substantial impact on Kazakhstan’s economy, particularly on its budgetary revenues derived from the oil industry.

Oil and Gas

Afghanistan to Boost Oil Production in the Amu Darya Basin

Afghanistan plans to launch 25 new oil wells in the Amu Darya basin, increasing daily oil production to 3,000 tons. Hamdullah Fitrat, the deputy spokesman of the Islamic Emirate of Afghanistan, shared that there are currently 24 active wells in this field, from which 1,300 tons of oil are extracted daily. According to Fitrat: "The Ministry of Mines and Petroleum plans to activate 25 more wells by the end of this year, of which 18 will be newly drilled, two will be exploratory wells, and five will be rehabilitated.” Economic experts stress that officials should carefully plan new well drilling and attract investors to process the extracted oil. Economic expert Abdul Zahoor Madaber stated that Afghanistan has abundant natural resources but lacks modern machinery to process them, and cooperation with other countries is needed to import this equipment. Mohammad Asif Stanekzai, another economic expert, added: “The production and processing of natural resources can create job opportunities and have a positive impact on reducing inflation in Afghanistan.” According to the Ministry of Mines and Petroleum, only 10% of Afghanistan’s oil needs are currently met from domestic production. The Amu Darya is a vital river for Central Asian countries. While 72-73% of its water originates in Tajikistan, the majority is used by neighboring countries. In April of this year, the countries of Central Asia distributed Amu Darya and Syrdarya water for the summer of 2024. Under the agreed quota, the draw on water from the Amu Darya watershed will be 56 billion cubic meters for the year, with about 40 billion cubic meters used in the April-to-October growing season. As stated in the Interstate Commission for Water Coordination (ICWC) agreement, Uzbekistan will receive 16 billion cubic meters, Turkmenistan will receive 15.5 billion cubic meters, and Tajikistan will receive 6.9 billion cubic meters. The ICWC claims that the total number of irrigated lands in Central Asian countries is 4.3 million hectares in Uzbekistan, 2.5 million hectares in Kazakhstan, 1.9 million hectares in Turkmenistan, 1 million hectares in Kyrgyzstan, and 680,000 hectares in Tajikistan.

Oil & Gas

Kyrgyzstan Seeks Crude Oil Supplies from Azerbaijan

At a meeting with Azerbaijan’s Energy Minister Parviz Shahbazov, his counterpart from Kyrgyzstan, Taalaibek Ibrayev, proposed signing a long-term contract to supply Azeri crude oil to Kyrgyzstan. The bilateral meeting took place on September 16 in Bishkek, on the sidelines of the 4th meeting of energy ministers of the Organization of Turkic States (Azerbaijan, Kazakhstan, Kyrgyzstan, Turkey, and Uzbekistan). Representatives of Turkmenistan and Hungary attended as observers. The Azeri Energy Minister expressed its readiness for cooperation, and proposed establishing a special working group to organize oil supplies. Ibrayev also proposed that Azerbaijan participate in hydropower and renewable energy projects in Kyrgyzstan, and consider preferential financing of $2 million from the Azerbaijan-Kyrgyzstan Development Fund for the purchase and installation of charging devices for electric vehicles in Kyrgyzstan. Today, Kyrgyzstan’s local capacity for refining crude oil and producing motor fuel covers about 5% of domestic demand, with the rest imported from Russia. During Kyrgyz President Sadyr Japarov’s visit to oil-rich Azerbaijan earlier this year, negotiations were held with the Azeri state oil company, SOCAR, on Azerbaijani oil supplies to Kyrgyzstan’s Junda refinery. Energy Minister Ibrayev commented that the Junda oil refinery requires more than 1 million tons of crude oil annually for refining. On August 30, the refinery reopened in the town of Kara-Balta, about 100 kilometers west of Bishkek. Late in March, the refinery completed a significant overhaul and plans to reach its total annual capacity of processing 800,000 tons of crude oil by the end of this year.

Oil

Uzbekistan Begins Processing Afghan Crude to Alleviate Energy Shortages

Uzbekistan’s Saneg oil refining company has begun processing Afghan crude oil at its Fergana refinery, to help ease Afghanistan’s energy shortages under Taliban rule. The first shipment of oil was transported by rail from the Hairatan terminal in Afghanistan's northern Balkh province. Afghanistan faces a significant energy crisis due to supply issues from Iran and Turkmenistan. The Taliban wants to restart domestic oil production to reduce its dependence on imports. Afghan crude oil, mainly extracted from the Amu Darya basin, is not fully used because Afghanistan needs more facilities to refine it. However, fortunately for Afghanistan, its neighboring countries to the north and west are willing and capable of supplying electricity, gas, and light oil products so that the country can, to some extent, improve its energy security. The refining agreement represents one of the first cross-border collaborations for Afghan crude oil, despite the historically complex relations between Afghanistan and Uzbekistan. Other countries, such as Russia and Kazakhstan, are looking at similar opportunities to gain market share and indirectly support the Afghan economy. This shows how the Central Asian countries are changing their strategies while Afghanistan is isolated internationally. For example, at the end of April this year, a delegation from Kazakhstan paid an official visit to Kabul, where a meeting of the Kazakh and Afghan businesses and an exhibition of Kazakh products were held. The visit to Kabul shows Astana’s intention of using trade to improve Kazakhstan’s relations with the new Afghan government. Saneg’s initiative to process Afghan oil is part of Uzbekistan's strategy to boost its refining and seize business opportunities in a volatile region. Exporting refined products to Afghanistan could bring extra revenue, and help a struggling neighbor. However, political instability and fragile relations may limit the long-term benefits. Companies from Russia are also interested in similar deals. Uzbekistan has also signed five agreements on mining projects in Afghanistan. These agreements, worth $1.15 billion, were part of a larger package of 35 agreements and memoranda of understanding signed between the two countries. These agreements increased Uzbekistan’s investment in Afghanistan by more than $2.5 billion.

Oil

Tajikistan Proposes Launching Oil Refinery With Russian Tatneft

Tajikistan wants to establish cooperation with Russia's Tatneft to open an oil refinery in the Dangara free economic zone, in Tajikistan's Khatlon region. This was announced by the country’s Minister of Industry and New Technologies, Sherali Kabir, during a recent investment forum in Dushanbe between Tajik and Russian companies. “One of the most important issues that we see in the development between our countries is the improvement of our production capacities, including the production of fuel and lubricants, cooperation, and the creation of new mechanisms. If we launch this enterprise together with Tatneft, we can achieve great progress in this regard.” Kabir said. It is noted that this will help Tatneft enter the markets of Afghanistan and Pakistan. “As was said, up to 30% of Tatneft’s raw materials are exported. Bring them here (Tajikistan), process them — and imagine what a huge market the company could open up for itself. 40 million people in Afghanistan, and over 230 million in Pakistan,” Timur Yoribek, Head of the International Relations Department of the Ministry of Industry of Tajikistan, commented. According to him, Tajikistan has ideal logistics routes for this — seven bridges leading to Afghanistan, and the shortest links to the Pakistani seaports. Construction of the Dangara oil refinery began in 2014 and was completed in 2018. The plant's planned capacity is 1.2 million tons of oil per year, but the commissioning has been delayed due to a shortage of raw materials. Tajikistan produces a small amount of oil, which is not enough to supply the refineries.