What are the volumes of oil production and consumption in Kazakhstan and in the world.

25.12.2024

In 2024, Kazakhstan's oil production decreased by more than 2% and its oil exports fell by 3%. Meanwhile, globally, oil production and consumption continue to grow.

There are several reasons why the country's oil production has declined. The main one is the drop in production at the Tengiz and Kashagan fields, where production was halted during the year due to maintenance work. The indicators were also negatively affected by the restrictions in the operation of the Orenburg Gas Processing Plant (OGPP) and the Caspian Pipeline Consortium (CPC). However, despite all this, the republic continues to exceed the OPEC+ oil production quota, remaining among the deal breakers. Kazakhstan's oil is in great demand in European countries. But due to the decline in production, supplies to the region have decreased.

Global demand for hydrocarbons is still high and remains so. The International Energy Agency (IEA) expects that this year global production will increase by more than 0.6 million barrels per day (bpd), consumption - by 0.8 million bpd. Experts predict that next year the demand for oil in the world will still grow, as well as its production.

In Kazakhstan, oil production should also increase in 2025, given the completion of the Tengiz expansion project. However, this contradicts the republic's commitments under the OPEC+ agreement. The alliance this month extended voluntary cuts for another year. How are the authorities going to resolve this dilemma?

Oil prices, despite rising consumption, the cartel's production curbs, and problems with Russian oil supplies due to sanctions, remain low and even declining. According to the U.S. Energy Information Administration (EIA), in November the average spot price of Brent crude oil amounted to $74 per barrel, which is $1 less than the average value in October. Analysts believe that in 2025 prices will be at about the same level. At the same time, Kazakhstan's budget for next year is based on the oil price of $75 per barrel.

What happened in Tengiz?

So, the Ministry of Energy of Kazakhstan assumes that this year oil production in the country will be 2 million tons less than last year. Indicators for 11 months confirm these forecasts. During this period the volume of oil and condensate production amounted to 80.5 million tons or 2% less than for the same period last year (82.2 million tons). And this is largely due to the decline in production at major fields.

Thus, Tengiz produced 25.9 million tons of oil in January-November - 2.1% or 600 thousand tons less than a year earlier. In May and August, 50 days of maintenance were carried out in connection with the planned completion of the Future Expansion Project. In addition, at the Second Generation Plant (SGP), production was partially halted to repair the waste heat boiler, where localized through-corrosion damage was discovered during an “equipment inspection.” The repair work has been underway since October 26 and will last until the end of the year. Earlier, the Ministry of Energy reported that due to repairs at the ZVP oil production at the field decreased by 28-30% or 61-63 thousand tons per day.

Production at Kashagan decreased by more than 7% to 15.8 million tons (January-November 2023 - 17.1 million tons). Production at the field was shut down for a total of 21 days, during which time the operator was replacing a slug catcher at the Bolashak oil and gas treatment plant that failed in 2022.

Karachaganak produced 11.1 million tons from January to November - 0.9% more than in the same period last year (11 million tons). At the same time, there were unscheduled shutdowns due to the restriction of crude gas intake by the OGPZ.

The decline in oil production in the country was also affected by planned preventive shutdowns at the CPC, which is the main export pipeline for all three of these major fields.

All this led to a year-on-year drop in oil exports by more than 1.1 million tons to 63.2 million tons in 11 months.

The Energy Ministry expects the final figures for oil production to be at 87.8 million tons and exports at 68.3 million tons, down 2.3% and 3.1%, respectively, from 2023. The domestic market will be supplied with 17.9 million tons.

Europe needs KEBCO

European countries are again becoming the main destination for Kazakhstan's oil exports. If from January 2013 to March 2018, according to the Institute of Economic Research of the Ministry of National Economy of Kazakhstan, 83% of Kazakhstan's oil exports went to this region, then from April 2018 to February 2022 this figure dropped to 73%, and by February 2023 the average monthly share of European supplies already amounted to 63%. But since the first quarter of last year, the dynamics have reversed, and already in January-September this year, out of more than 53.8 million tons of exported oil, more than 84% or almost 45.3 million tons were delivered to Europe. At that, more than half of them were taken by Italy, having increased its purchases by 28% compared to last year.

Kazakhstan's KEBCO (Kazakhstan Export Blend Crude Oil), which is the same quality as Russia's Urals, is very popular with European refineries.

According to Argus, from January to October KEBCO's seaborne exports from Kazakhstani companies' resources totaled 7.6 million tons, down by 939,000 tons compared to the same period last year. The decrease was mainly due to restrictions on production in Kazakhstan under the OPEC+ agreement, as well as increased volumes of KEBCO pumping through the Druzhba pipeline to Germany. Shipments to the refinery in Schwedt, Germany, increased by 527,000 tons to 1.2 million tons over the period. The main exporter was the national company KazMunaiGas (KMG), which supplied oil from the Karachaganak field. In addition, since April, the shareholders of Kashagan began to ship raw materials to Germany, 20-50 thousand tons per month.

Kazakh companies deliver crude to Transneft system via two routes: by tankers from Aktau port to Makhachkala, as well as via Atyrau-Samara pipeline. Heavy oil, shipped via the first direction, arrives only to Novorossiysk, while lighter crude from Samara can be shipped to Novorossiysk, Ust-Luga or via Druzhba to Germany, experts of the price agency note.

The main buyers of Kazakhstan oil in sea ports are trading companies Vitol, Euroasia Oil and Kazmunaygas Trading - trading division of KMG. The largest end consumers of the grade are Italian Eni and API, KMG-controlled Romanian Rompetrol, Lukoil refineries in Bulgaria and Romania, as well as Algerian Sonatrach, which owns the SRI enterprise in Sicily (Italy).

The Netherlands became the second largest buyer of Kazakh oil after Italy for January-September this year - over 5.5 million tons, which is 9.2% more than a year earlier.

KEBC's sea deliveries to Rotterdam for ten months increased by 320 th. tons, up to 500 th. tons. The entire volume was directed from Ust-Luga to the Maasvlakte terminal. Rotterdam is a major oil refining hub, where BP, ExxonMobil, Shell and Vitol refineries are located. It is also home to large oil storage facilities used for shipments to other countries. The Rotterdam port terminal is connected by a separate pipeline to the Flissingen refinery owned by TotalEnergies and Lukoil, Argus said.

Kazakh oil shipments to Romania, where KMG has its refineries, fell 15% to just over 3 million tons.

Nevertheless, as we can see, KEBCO's main buyers were refineries owned by oil companies operating in Kazakhstan.

At the same time, seasonal preventive maintenance at European refineries, as well as lower refined products production margins year-on-year, contributed to the decline in KEBCO's value. Its price had fallen to a $0.90-1/bbl premium to Brent by early October, compared with premiums of $1.65-2.50 in June-July, and $2.15-2.50 a year earlier, according to Argus.

Notably, export figures for January-September show a sharp decline in the share of Asian buyers. For example, China and South Korea reduced imports of Kazakhstani oil by 40% and 64%, respectively, to 2.6 and 1.7 million tons. Whereas most European consumers, except for Turkey, Spain and Croatia, have increased their purchases of Kazakh oil. Germany increased imports the most - 2.3 times, to over 1.1 mln tons.

The growth of imports of Kazakhstani crude by more than 70%, to almost 1.5 million tons, from the USA, which again became the largest oil producer in the world this year, looks interesting.

Who is increasing production

The unspoken confrontation between the major oil producing and consuming countries continues in the global market. As the IEA notes in its December report, global oil demand will increase by 840,000 bpd this year and by 1.1 million bpd next year, rising to 103.9 million bpd. This will be mainly due to increased consumption in the petrochemical sector, while transportation demand will continue to be constrained by the growing use of electric vehicles globally.

World oil supply will increase by 630,000 b/s this year and by 1.9 million b/s next year, to 104.8 million b/s. At the same time, production will increase if even OPEC+ does not cancel its cuts. This year and next year supplies will increase by about 1.5 mln b/s at the expense of the USA, Brazil, Guyana, Canada and Argentina.

Efforts by members of the alliance to curb production to raise prices are offset by increased oil production from countries outside the group. According to the IEA, Brent futures were largely unchanged at around $73/bbl in November.

In turn, the U.S. Energy Information Administration (EIA) notes that the average spot price for Brent in November amounted to $74 per barrel - $1 less than in October. Oil prices fell slightly in November after the ceasefire between Israel and Hezbollah in Lebanon.

EIA sees two main sources of price uncertainty: the course of the ongoing conflict in the Middle East and the willingness of OPEC+ members to adhere to voluntary production cuts. An escalation in regional conflict could reduce oil supplies, and political uncertainty could increase the risk premium. In addition, the alliance is likely to continue limiting production below the recently announced targets in 2025.

According to the EIA, non-OPEC+ countries are the drivers of growth in global oil and condensate production this year, and this trend will continue in 2025. The agency sees global oil production increasing by 0.6 million b/d in 2024. Production outside the alliance rose by 1.9m b/d this year due to growth in the US, Canada and Guyana, but this growth was partially offset by a 1.3m b/d cut in production by OPEC+ members.

EIA forecasts global oil consumption to grow by 0.9 mb/d in 2024 and 1.3 mb/d in 2025, still below the average annual growth rate of 1.5 mb/d in the 10 years to Covid-19 and less than the oil demand growth seen in 2021-2023 during the post-pandemic recovery.

Meanwhile, almost all the growth in global oil consumption is expected to come from developing countries, mainly from Asia - more from India and less from China. In contrast, oil consumption in ETO countries is expected to remain relatively flat in 2024 and 2025.

Cartel collusion

Due to weak demand and production growth in non-OPEC+ countries, on December 5, the alliance postponed the start of oil production growth for three months until April 2025 and extended the full lifting of cuts for a year - until the end of 2026. Previously, the group had planned to start lifting restrictions from October 2024. OPEC+ curbs the production of 5.8 million b / s (about 5.7% of world demand), of which 2 million b/d - the reduction of the entire group, another 3.8 million b/d agreed to voluntarily reduce Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Algeria, Oman and Kazakhstan.

According to Reuters calculations, OPEC+ production now accounts for 48% of global supply, the lowest since its creation in 2016 with a market share of more than 55%.

Experts polled by the agency believe that the oil market's attention will now focus on the actions of US President-elect Donald Trump, who may impose new sanctions against Iran, duties on imports from China and has promised to end the war in Ukraine. During his previous term as U.S. president, he repeatedly criticized OPEC+ for high oil prices and asked Saudi Arabia to supply more oil if the kingdom wants U.S. support in the fight against its main rival Iran.

Trump wants to increase oil production because he promised to lower energy prices during his campaign. However, this is not so easy to achieve. According to experts, oil production in the US is already at the limit. This year, the country is producing an average of 13.24 million bpd, ranking first in the world by this indicator (domestic consumption - 20.2 million bpd).

At the same time, shale oil producers are expected to increase production only if it is profitable. According to some estimates, their production cost is $40 per barrel, and they are satisfied with a price of at least $60 per barrel. At the same time, new fields take years to develop, so Trump's promises of permits to drill in new locations are unlikely to bring new barrels anytime soon.

The U.S. could persuade Saudi Arabia (the world's third largest oil producer today) to increase production if the kingdom, on the other hand, is not interested in cutting production to achieve high oil prices of at least $80 per barrel.

Russia, the second major oil producer, is also unlikely to agree on an increase in production, as it is under sanctions due to its military invasion of Ukraine. In addition, this year the European Union and Britain have stepped up pressure on Russian oil transporters as well as the insurance companies that provide services to them. London has imposed sanctions against more than 100 vessels involved in Russian energy exports, including 93 oil tankers, while Brussels has imposed sanctions against 73 vessels. It is possible that these measures will lead to a reduction in the supply of Russian oil to the world market.

China's consumption declines

Oil demand growth this year has been weaker than expected, largely due to China, the world's second-largest oil consumer. After years of rising consumption, economic problems and a shift to electric vehicles are dampening the outlook for oil demand growth.

It seems that the PRC is gradually ceasing to be the main source of hydrocarbon consumption growth. Recently, Sinopec reported a decline in the country's demand for diesel and gasoline. The company forecasts that China's oil consumption will peak by 2027 at no more than 800 million tons per year or 16 million bpd, Reuters reports.

China's oil consumption will total 750 million tons this year, down about 10 million tons from last year.

Sinopec said the wider use of liquefied natural gas (LNG) and electric vehicles will reduce demand for gasoline and diesel, and the petrochemical sector will end up consuming more oil than the transportation sector.

Diesel demand will decline 5.5% year-on-year to 174 million tons. CNG trucks, which made up 22% of the fleet in the first three quarters, will displace 49 million tons of diesel in 2024.

Gasoline consumption will fall 2.4%, to 173 million tons in 2025. Electric vehicles will displace about 26 million tons or 15% of gasoline consumption.

Of the three main refined products, only jet fuel consumption is expected to grow, up 7% year-on-year to 45.5 million tons.

As a result, the petrochemical sector will account for 55% of oil consumption in 2060, up from 22% in 2024.

From January to November this year, China produced 194.92 million tons of crude oil, up 1.9% from a year earlier. In 2025, it is expected to produce 215 million tons of oil and refine 970 million tons.

The oil market is sensitive to geopolitical events in the world. As a rule, the oil market reacts to any incident that may lead to a reduction in supply by raising prices. The war in Ukraine unleashed in 2022 by Russia, which accounts for about 10% of global production, has contributed to a sharp rise in energy costs. However, the countries - the main consumers of oil - have learned to respond to such incidents by reducing demand, curbing economic growth or increasing their own production of hydrocarbons. A group of the world's largest oil producers, led by Saudi Arabia and Russia, who created the OPEC+ alliance, are trying to regulate the market to set the price parameters they need. But in recent years they have been less and less successful in doing so. The members of the group themselves contribute to this by violating their commitments. Kazakhstan is among such violators. Despite a significant decline in production, this year the total level of oil production in the country is 0.7% above the established quota. The alliance has given the republic a year and a half to compensate for overproduction. But the situation is aggravated by the fact that the country also has obligations to investors - foreign oil companies, which have invested tens of billions of dollars to increase production. In addition, the government itself is interested in production growth, as it expects to increase budget revenues. How will this difficult task be solved? In the coming 2025, this issue will probably be one of the main ones for the country's oil sector.

OPEC+ crude oil production million barrels per day

Countries	November 2024	Quota¹	Potential²
Algeria	0,9	0,91	0,99
Congo	0,24	0,28	0,27
Equatorial Guinea	0,06	0,07	0,06
Gabon	0,23	0,17	0,22
Iraq	4,2	3,9	4,87
Kuwait	2,48	2,41	2,88
Nigeria	1,34	1,5	1,42
Saudi Arabia	9,04	8,98	12,11
UAE	3,24	2,91	4,28
Total OPEC - 9³	21,74	21,13	27,1
Iran⁴	3,4	-	3,8
Libya⁴	1,18	-	1,23
Venezuela⁴	0,89	-	0,89
Total OPEC	27,21	-	33,02
Azerbaijan	0,48	0,55	0,49
Kazakhstan	1,45	1,44	1,62
Maxico⁵	1,53	-	1,59
Oman	0,76	0,76	0,85
Russia	9,25	8,98	9,76
Others⁶	0,71	0,87	0,86
Total non-OPEC	14,19	12,59	15,16
OPEC+ 18 In November 2022 Deal⁴	34,4	33,72	40,67
Total OPEC+	41,4		48,18
Source: IEA

1. Includes additional voluntary restrictions, if declared. 2. Capacity levels can be achieved within 90 days and maintained over an extended period. 3. Angola has withdrawn from OPEC effective January 1, 2024. 4. Iran, Libya, Venezuela are exempt from cuts. 5. Mexico is excluded from OPEC+. 6. Bahrain, Brunei, Malaysia, South Sudan and Sudan.