The situation with Kazakhstan's main export commodity is paradoxical. For many years, the country has been trying to increase oil production, which should have increased budget revenues from oil exports. Now that the oil and gas industry can produce up to 100 million tons of oil annually, it is forced to limit production. The commitments under the OPEC+ deal force the government to ask oil companies to curb production. At the same time, demanding that international companies protected by production sharing agreements (PSAs) comply with their orders is also a difficult task.

For at least the last two years, Kazakhstan has been regularly named among the few violators of the oil production quota set by the OPEC+ agreement. The country's authorities periodically declare their “full commitment to the agreement” and promise to fulfill their obligations and compensate for the cuts. How long will they be able to maneuver between the demands of their alliance partners and foreign companies producing Kazakh oil, which have invested billions of dollars to increase production, constantly pushing back the fulfillment given to both sides?

“There is no critical impact.”

On March 12, the Ministry of Energy stated Kazakhstan's full commitment to the OPEC+ agreement, assuring that the country “continues to work purposefully to fulfill its obligations, including compensation for volumes produced more than established quotas. “Affidavit” of the Ministry of Energy was a response to publications in several foreign media, which, referring to data from the Organization of Petroleum Exporting Countries (OPEC), reported that the republic again exceeded the quota for oil production. According to the March OPEC report, Kazakhstan in February produced 1 million 767 thousand barrels of oil per day (bpd), which is 198 thousand bpd more than in January (1,570 thousand bpd) and 299 thousand bpd above the quota (1,468 thousand bpd), established under the OPEC+ deal.

Kazakhstan was not the only member of the alliance to produce more than the established norm. Such countries as Iraq, the United Arab Emirates, Algeria, and others also exceeded the oil production plan. However, their figures were much lower compared to Kazakhstan's. In total, in February, OPEC+ member countries produced 363 thousand bpd above the agreed norm, and Kazakhstan accounted for more than half, or 54.5% of this overproduction.

The Ministry of Energy explained in its statement that “the quota overrun in February was due to technological processes within the Future Expansion Project (FEP) at the Tengiz field”.

Earlier, on March 7, at a press conference in Astana, Energy Minister Almasadam Satkaliyev said that the increase in production was due to the test launch of the FEP, that work is currently ongoing, and that the field will reach full capacity in the second half of this year.

Recall that on January 24, Tengizchevroil (TCO) announced the start of oil production under the PBR, which involves increasing oil production at Tengiz by an additional 12 million tons per year, or 260 thousand bpd (to 40 million tons per year, or 850 thousand bpd).

In early February, oil production at Tengiz reached a record 870,000 bpd.

However, this growth contradicts the republic's obligations under the OPEC+ deal. Therefore, Energy Minister Almasadam Satkaliev “held talks with the country's largest shareholders and subsoil users” such as ExxonMobil, TotalEnergies, Shell, which are involved in the development of Tengiz and Kashagan fields. The companies were “set a rather serious task” to reduce oil production to achieve the planned production parameters.

“I would like to note that this conversation was productive, and we did not receive a refusal, and we very well discussed the possibilities of realizing this task set by the Government of the Republic of Kazakhstan,” said the Minister.

The Energy Ministry said that “in the course of discussions, confirmed the schedule of fulfillment of obligations under the OPEC+ + agreement, as well as agreed measures to compensate for volumes produced more than established quotas.” All these issues were also planned to be discussed with the heads of the head office of the above-mentioned foreign companies during Satkaliyev's trip to the U.S. to participate in the CERAWeek 2025 energy conference.

The agency notes that the republic “has taken the necessary measures to compensate for the temporary increase in production” and that “in the short term, the volumes will be adjusted to fully comply with the established limits.

At the same time, it believes that “it is also necessary to take into account that Kazakhstan accounts for only 1.5% of global oil production, and within the framework of OPEC+, about 3%.”

“These indicators demonstrate that Kazakhstan does not have a critical impact on the global balance of supply and demand, but despite this, our country remains a reliable partner and fulfills its commitments,” the ministry said.

If we look at oil prices during this period, it turns out that the Kazakhstani authorities are right to some extent. According to Investing.com, in January this year, the average price of Brent oil was at $70.65 per barrel, in February it rose to $72.81, and in March, to $75.67. That is, despite the growth of production in Kazakhstan, the cost of oil, on the contrary, even increased.

The Ministry of Energy again assured that “Kazakhstan invariably supports the stability of the world oil market and is fully committed to the OPEC + agreements”, that “any further plans for the development of the oil industry of Kazakhstan will be implemented only in strict accordance with international obligations of the country and considering the situation in the world market.

Did it break in time?

As Vice Minister of Energy Alibek Zhamauov said at a press conference, Kazakhstan plans to reduce production to OPEC+ levels, i.e., about 1.5 mln bpd, as early as March. The official noted that the main reduction - up to 70% of the total volume - will affect the oil transported through the pipeline Caspian Pipeline Consortium (CPC).

Recall that this route from Kazakhstan exports mainly oil from Tengiz, Kashagan, and Karachaganak fields. Since OPEC+ restrictions do not apply to gas condensate, it turns out that the shipment of Tengiz and Kashagan oil will decrease.

At the same time, it is not excluded that the full capacity of Tengiz may be postponed to a later date. Alibek Zhamauov did not confirm, but also did not deny such a possibility, saying that “we will know a little later” when the field will be fully operational.

At the same time, it seems that the CPC has been chosen as the main direction for reducing exports for a reason. First, more than 80% of Kazakhstan's export oil is shipped through it. Secondly, the pipeline is technically not quite serviceable. The fact is that on February 17, one of the CPC oil pumping stations (OPS) located in the territory of the Russian Federation, namely OPS “Kropotkinskaya” (Krasnodar region), was attacked by Ukrainian drones. The armed forces of Ukraine, with which Russia is currently at war, launched seven drone strikes. After that, the station, which receives raw materials from Russian producers, went out of operation.

February 18, the Russian company Transneft, which manages the share of the Russian Federation in the CPC, said that because of the attack the NPS received “serious damage: the roof was destroyed, the closed switchgear, gas turbine unit (GTU) was damaged, cables and cable trestle, water tank, destroyed 2 transformers, filters and fire extinguishing system GTU.

The company, referring to the opinion of CPC specialists, reported that the consequences of the strike will be eliminated within 1.5-2 months, which may lead to a 30% reduction in oil pumping from Kazakhstan. And although our Ministry of Energy states that currently Kazakh oil is accepted in CPC without any restrictions, nevertheless, this circumstance can be a serious pressure tool in negotiations with oil companies to reduce production. Moreover, Satkaliyev has already stated that “we are ready to use both administrative mechanisms and issues related to access to oil pipeline infrastructure” to achieve production cuts and fulfill our commitments to the OPEC+ group.

The tool (in the form of a drone attack on one of the CPC oil pumping stations) to force Kazakhstan to reduce production has “arrived” very opportunely, says Askar Ismailov, director of the analytical company PACE Analytics.

“Earlier, I said that Russia and Saudi Arabia will find an instrument of 'pressure'. And it has been found. So now the fulfillment of Kazakhstan's obligations is already a matter of external management. Kazakhstan does not have sufficient export routes to compensate for the reduction in oil pumping through the CPC. So now the country will fulfill all the obligations and compensations given earlier,” the expert believes.

The Ministry of Energy said that the repair work at the oil pumping station has already begun. The consortium is restoring the facility with its forces and at its own expense.

At the same time, there is no guarantee that the CPC will not be attacked again by the Ukrainian military or anyone else.

Alibek Zhamauov said that there were contacts with the Ukrainian side through the Ministry of Foreign Affairs and diplomatic channels, but the Energy Ministry has no specific information on this situation.

Will it be difficult to recover?

Meanwhile, curbing or reducing oil production can have a negative impact on the productivity of fields, leading to deterioration of reservoir pressure and well productivity.

“In low-permeability reservoirs, reduced withdrawal rates can lead to an irreversible drop in production rates. In gas condensate fields (e.g., Karachaganak), changes in thermodynamic conditions can cause condensate to precipitate in the reservoir, making some reserves irrecoverable (the “condensate trap” phenomenon). In high-pressure fields, a decrease in withdrawal can provoke an increase in water saturation in the bottomhole zone, worsening subsequent production,” says Askar Ismailov.

According to him, after a long decline in production, it can be difficult to restore production rates, especially if there has been degradation of reservoir properties. At old fields, which, for example, are operated by the national company KazMunaiGas, the restart of wells after conservation can lead to complications in the form of pore space blockage (colloidal sediments, sulfate, and carbonate deposits).

There is a possibility of increased risks of corrosion and mechanical damage. When the hydrocarbon flow rate decreases, there is an increased risk of salts, paraffins, and asphaltenes precipitation in pipelines and wells. Slow gas and liquid flow in pipes can contribute to equipment corrosion due to the formation of a harsh environment.

In addition, the fixed costs of maintaining the field (personnel, compressors, electricity, security) remain high even as production declines, which increases the cost per barrel. Small wells, in general, can become unprofitable if production falls below operating expenses.

“I will no longer focus on the income and tax revenues. Kazakhstan, being an export-oriented oil country, will lose foreign currency revenues. The state budget will be short of taxes and rent payments from oil-producing companies. Fortunately, Kazakhstan's refineries are not tied to three major fields. Although if the reduction in production levels affects independent oil producing organizations, Kazakhstan may once again face a shortage of fuel”, - said Askar Ismailov.

Of course, it can be assumed that American companies will try to refuse to reduce production, citing U.S. laws that prohibit them from participating in cartel collusions. However, the expert believes that Chevron and ExxonMobil will simply put before the fact that it will not be possible to increase production.

“For Kazakhstan, this is a very favorable position (in terms of fulfilling obligations to OPEC+). We “force” the production companies, referring to an external factor, a kind of force majeure (attack on the CPC and destruction of the NPS). Such an explanation is also favorable for American companies when they will justify themselves to the U.S. government,” he says.

According to the schedule published on the OPEC website, to follow its commitments, Kazakhstan should produce no more than 1.472 thousand bpd in April and will be able to increase this volume to only 1.509 thousand bpd by the end of the year.

Meanwhile, the government had high hopes for completing the PBR as a source of treasury replenishment. Tengiz production growth was expected to generate an additional 1.4 trillion tenge in revenues, as Finance Minister Madi Takiyev said last October during the Majilis discussion of the three-year budget.

In February, during the ministry's board meeting, the head of the Ministry of Energy said that for 2025, the plan for oil and gas condensate production is 96.2 million tons, which is 9.6% or 8.5 million tons more than in 2024. The growth was supposed to come from increased production at Tengiz. However, these plans are not destined to come true.

Last year, 87.7m tons were produced against a plan of 90.3m tons. According to Satkaliyev, the failure to meet the plan was due to overhauls at major fields: 50 days at Tengiz and 28 days at Kashagan. Unscheduled shutdowns at Karachaganak, restrictions on gas intake by the Orenburg GPP, and fulfillment of OPEC+ commitments also contributed to the decline.

The group of the world's largest oil producers (18 countries) led by Saudi Arabia and Russia, which created OPEC+ in 2016, is trying to regulate the market to set the price parameters they need.

Due to weak demand and rising production in non-OPEC+ countries, on December 5 last year, the alliance postponed the start of oil production growth for three months until April 2025 and extended the full cancellation of cuts by a year to the end of 2026. The group had previously planned to start lifting restrictions from October 2024. OPEC+ curbs the production of 5.8 mln b/s of oil (about 5.7% of global demand), of which 2 mln b/s are the cuts of the entire group, and another 3.8 mln b/s agreed to voluntarily reduce Saudi Arabia, Russia, Iraq, OEA, Kuwait, Algeria, Oman, and Kazakhstan.

At its last meeting, the alliance decided to gradually return the voluntarily reduced 2.2 million b/d to the market from April 1, 2025, “while remaining adaptable to changing conditions.” “This gradual increase may be suspended or canceled depending on market conditions,” the group said on OPEC's website.

The alliance's eight members also reaffirmed their intention to offset any overproduction by June 2026 fully.

Quota-violating countries have agreed that most overproduced volumes will be compensated in the first months of the compensation period.

Kazakhstan's oil production level under the OPEC+ quota from April 2025 through September 2026

Destinations of oil exports from Kazakhstan for 2023-2025.

2025* – forecast 

According to the Ministry of Energy, in 2024, 65.6 million tons of oil, or 95.63% of the total volume of exported raw materials, was shipped via routes passing through Russia, including the CPC - 80%.

Oil exports from Kazakhstan in 2024-2025 according to Argus data

2025* – forecast

According to the Argus pricing agency, in 2024, 66.4 million tons of oil, or 95.68% of the total volume of exported crude, was shipped via routes passing through Russia. In 2025, 72.7 million tons, or 95.66%, will be shipped via these routes. The share of oil shipped via the CPC is 80.26% in 2024 and 81.58% in 2025.