APRIL 20 2015 (The Conway Bulletin) – Kazakhstan extended a ban on the import of Russian oil products by an extra month until May 20. An original 45-day ban had been due to end on April 20. Kazakhstan imposed the ban because an imbalance in the Russian rouble-Kazakh tenge exchange rate has triggered an influx of cheap Russian oil products.
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(News report from Issue No. 228, published on April 22 2015)
APRIL 21 2015 (The Conway Bulletin) – Dragon Oil, a small London-listed oil producer, increased output at its operation in Turkmenistan by 23% in Q1 2015 compared to Q1 2014, it said. Average production at its Cheleken field was just over 88,000 barrels a day between Jan. 1 and March 31.
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(News report from Issue No. 228, published on April 22 2015)
APRIL 21 2015 (The Conway Bulletin) – Tengizchevroil, Kazakhstan’s largest oil producer and one of its most successful post-Soviet energy projects, said that it was slowing expansion plans in response to the drop in global oil prices.
The announcement is yet more disappointing news for Kazakhstan. It is trying to cope with a sharp economic downturn triggered by the combined impact of the fall in oil prices and also the Western-imposed sanctions on Russia which have had a knock-on effect in the rest of the former Soviet Union.
“Global oil prices have dropped significantly, so we responded by slowing the project down and cutting spending for 2015,” reports quoted Aidar Dosbayev, head of production at Tengizchevroil, as saying at a conference.
Tengizchevroil is vitally important to Kazakhstan. It wants to become one of the world’s top energy producers although the much-delayed Kashagan project has dented its ambitions. And the delay in starting up Kashagan has meant Kazakhstan’s oil output hinges on Tengizchevroil.
Tengizchvroil had said it planned an expansion that would boost output to 38m tonnes of oil a year by 2019, up from around 27m tonnes.
The oil price drop, though, has slowed planes, Mr Dosbayev said.
“Although we slow down the pace of the project and reduce costs, our commitments to Kazakhstan remain unchanged,” he said.
In the short-term, though, Kazakhstan’s income from the project will be reduced and job creation will be limited.
Chevron owns 50% of Tengizchevroil, ExxonMobil owns 25%, Kazmunaigas owns 20% and Lukoil owns 5%.
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(News report from Issue No. 228, published on April 22 2015)
APRIL 16 2015 (The Conway Bulletin) – Azerbaijan’s oil exports in Q1 2015 increased by 3.7% from a year earlier, a source at the state statistics committee told Reuters. The source said a rise in output at the BP-operated Azeri, Chirag and Guneshli (ACG) oilfields had driven the overall rise. BP has been under pressure to stem a drop in output at ACG.
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(News report from Issue No. 228, published on April 22 2015)
APRIL 22 2015 (The Conway Bulletin) – Azerbaijan’s government will have to dip into savings built up in its Oil Fund to prop up its ailing economy, economists have said.
They said the Azerbaijani government will not cut the state budget sufficiently despite a massive fall in the price of oil and gas.
“If the government does not cut budget spending the only real way to cover the deficit will be calling back State Oil Fund’s reserves abroad, or the government must have another big devaluation,” Samir Aliyev, an independent economist at the monthly Economic Forum magazine, told the Bulletin.
At Dec. 31 2014, the Oil Fund was worth around $37b.
The downturn in energy prices since last summer has hit Azerbaijan hard. It devalued its manat current by a third this year.
Rovshan Agayev, an independent economist, also told the Bulletin that even during the financial crisis of 2008 the government did not increase spending from the National Oil fund.
“This is a result of mismanagement of the state budget money for many years,” he said.
The independent MP Vahid Ahmedov told RFE/RL it was acceptable for the government to use cash from the fund, created in 1999, to prop up the economy.
“What was the Oil Fund is created for?” he said. “To save some money for the future generation and as well as to help the economy in crisis times.”
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(News report from Issue No. 228, published on April 22 2015)
APRIL 5 2015 (The Conway Bulletin) – Azerbaijan’s President Ilham Aliyev visited Saudi Arabia only a few days after members of the United Arab Emirates’ royal family had travelled to Baku for talks.
Some analysts have said that Mr Aliyev is looking to boost his alliances with Arab states as a potential bulwark against improving US-Iran ties.
“Saudi Arabia will extend its investment in Azerbaijan. We are both Muslim countries and Azerbaijan has good relations with Saudi,” Vahid Ahmadov, an independent MP, told the Bulletin.
In many ways it suits Azerbaijan to have its neighbour, Iran, ostracised and demonised by the international community. The thinking goes that if Iran is considered a rogue state, the US and Israel need Azerbaijan more. This month, at talks in Switzerland, the US moved to relax sanctions imposed on Iran because of concerns about its nuclear programme.
The opposition ReAl movement said that Mr Aliyev had been trying to woo Arab states because he needed more cash for various pipeline projects.
“Azerbaijan will need huge money for the TAP and TANAP projects. Oil revenues are falling and the government needs to find loans,” media reports quoted Azer Gasimli, an opposition activist, as saying.
“The IMF and World Bank set disturbing standards which require economic reforms for Aliyev. For him it is better to find loans from Arab countries.”
The EU and Western companies are investing in Azerbaijani energy and the infrastructure needed to transport it to markets. Azerbaijan, though, needs cash now.
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(News report from Issue No. 226, published on April 8 2015)
APRIL 7 2015 (The Conway Bulletin) – India’s external affairs minister, Sushma Swaraj, flew to Ashgabat to meet Turkmen officials to, possibly, push the TAPI pipeline project along. TAPI aims to carry Turkmen gas to India via Afghanistan and Pakistan.
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(News report from Issue No. 226, published on April 8 2015)
APRIL 2 2015 (The Conway Bulletin) – Azerbaijan’s Central Bank chief, Elman Rustamov, said that he believed the Azerbaijani government budget for 2016 would be based on oil costing around $50 per barrel, media said.
This is significant as Azerbaijan struggles to make a profit if oil prices are stuck at around $50 per barrel.
Effectively, then, Mr Rustamov is predicting the problems facing Azerbaijan’s economy will continue into next year.
At the end of last year Azerbaijan’s government had to cut various projects because oil prices had collapsed. Azerbaijan’s economy is hugely dependent on energy. International advisers have said that the government needs to concentrate on diversifying its economy away from oil and gas. Reform has been slow, though.
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(News report from Issue No. 226, published on April 8 2015)
APRIL 8 2015 (The Conway Bulletin) – A proposed $70b takeover of BG by Royal Dutch Shell will have implications for Kazakhstan’s energy sector. BG is a major shareholder in, and the operator of, the Karachaganak oil and gas project in north Kazakhstan. This will pass to Shell if the deal goes through.
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(News report from Issue No. 226, published on April 8 2015)
MARCH 26 2015 (The Conway Bulletin) – A parliamentary inquiry in Armenia said the government subsidised gas for consumers between 2011 and 2013 ahead of a controversial buyout of the pipeline network by Russia’s Gazprom.
The US-funded Radio Free Europe/Radio Liberty (RFE/RL) said the government had previously denied it was subsidising gas imports from Russia.
The Armenian government was desperate both to retain support ahead of an election and to write off a $300m debt to Gazprom. To do this, it needed the public’s support to sell the pipeline distribution network.
The inquiry’s findings will pile more pressure on Armenia’s president Serzh Sargsyan whose administration has become increasing unpopular.
The RFE/RL report also said Gazprom cut the gas price when Armenia agreed to join the Kremlin-led Eurasian Economic Union (EEU), which also includes Belarus and Kazakhstan.
“The commission has found documentary evidence of unpublicized Russian-Armenian agreements that gradually raised the gas price from $180 to $270 per thousand cubic meters in 2011-2013,” RFE/RL reported.
“Gazprom cut the price to almost $190 per thousand after Armenia agreed to join the Russian-led Eurasian Economic Union in late 2013.”
This is yet more evidence that Russia pressured Armenia into joining the EEU.
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(News report from Issue No. 225, published on April 12015)