Has mega-birth been expanded in Kazakhstan: is a conflict in OPEC+ inevitable?

Production has been expanded at the Tengiz field in Kazakhstan, starting at a third-generation plant (ZTP). Experts fear that the country will not be able to meet OPEC+ quotas again, raising the degree of confrontation among the parties to the deal.

"Tengizchevroil LLP (TCO) has reached an important milestone in the implementation of the Future Expansion project (PBR) by safely starting crude oil production at its new third-generation plant (ZTP) at the Tengizskoye field," the company reports.

The launch of production at the ZTP marks the beginning of a gradual increase in production in the coming months, they added.

"As expected, (this) will increase the total volume of crude oil production at Tengiz by another 12 million tons per year. After all production facilities reach full capacity, it is expected that the total volume of crude oil production will reach about 40 million tons per year, which will provide additional profit to Kazakhstan through taxes, royalties and other direct financial payments," Tengizchevroil said.

Half of the project belongs to the American Chevron, and the rest is distributed between Kazakhstan's KazMunayGas (20%), American ExxonMobil (25%) and Russian Lukoil (5%).

Earlier, as reported by EADaily, the Minister of Energy of Kazakhstan Almasadam Satkaliyev said at a speech in The Majilis of the parliament in December announced that the country plans to increase oil production. If in 2024 oil production was projected at 88.4 million tons, then from 2026 — over 100 million tons.

"Tengizchevroil is implementing a future expansion project that will ensure an increase in oil production by 12 million tons per year. Work on the 5th compressor has been completed at Karachaganak, work is underway to introduce the 6th crude gas re-injection compressor, which will ensure the maintenance of production shelves at the level of 11-12 million tons per year," the minister said.

Mining companies can send additional volumes of oil for processing, as the country is experiencing a shortage of fuel. But there is no free refinery capacity. The authorities plan to double the Shymkent refinery (up to 12 million tons) and increase production by 1.2 million tons by Atyrau refinery. But this is planned to be done in 2028-2030.

As a result, Kazakhstan is getting more and more oil for export, which provokes it to violate OPEC+ quotas again, although the Ministry of Energy of the country stated in December that they plan to adhere to their obligations.

"The recently carried out repair work on large oil fields increases the technical capabilities to increase the current level of oil production, however, Kazakhstan plans oil production for 2025 in accordance with its obligations under the OPEC+ agreement and the presented compensation plan," Astana said in December.

The situation is complicated by the fact that Kazakhstan needs to compensate for the violation of production quotas until October 2025. In January, additional volumes should be minus 65 thousand barrels per day. At the same time, the expansion of production at the Tengiz field is planned at 260 thousand barrels per day — a quarter of the projected growth in oil demand in 2025. As a result, the country may become one of the bright violators of the OPEC+ deal, which is struggling to maintain commodity prices.

Igor Yushkov, a leading analyst at the FNEB and an expert at the Financial University under the Government of Russia, says that Russia has fulfilled its obligations and reduced production below the quota, although its production significantly exceeds Kazakhstan's.

"In Kazakhstan, they can say that investments have been made ($ 48.5 billion). However, other OPEC+ countries can do this as well. The participants of the transaction have capacities of 6 million barrels per day in reserve," notes Igor Yushkov.

In this situation, the leading analyst of the FNEB notes, everything will depend on Kazakhstan itself, which will have to reduce production at other fields.

"The problem for Kazakhstan is that the obligations are signed by the state, and the production is carried out by commercial companies. And a possible violation of quotas will be a negative signal for other OPEC+ members who may follow the example of Kazakhstan, and a chain reaction will cause the return of those same 6 million barrels per day that will bring down the market," Igor Yushkov added.