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While we are all getting excited about the OPEC production freeze, I thought I would put it in perspective. This week, it was initially announced (the statement was later withdrawn), that the massive Kashagan field in Kazakhstan would resume presume production in a matter of days. Plans called for a restart with initial production of 75,000 barrels per day (bpd) in October, rising to between 150,000 and 180,000 bpd in November and December.
However, this statement was later retracted, and it now appears that the field is due to come back online by the end of the year. Production is expected to ramp up initially to 180,000 barrels per day and increase further to 370,000 bpd during 2017.
Interestingly, Wood MacKenzie, the expert energy consultancy we have cited numerous times, believes the field only capable of producing 154,000 bpd in 2017 and does not expect Kashagan to reach that output target until 2026.
The Kashagan consortium comprises China National Petroleum Corp., Exxon Mobil, Eni, Royal Dutch Shell, Total, Inpex and Kazakh state firm KazMunaiGas.
The importance of this article cannot be understated. OPEC is agreeing to agree (remember there is no real agreement yet) to a production freeze of around 700,000 bpd. In current context, this either balances the market, or arguably creates a slight production deficit. (please see this week’s Ty’s Take to help you put this article into perspective).
This field is not the only major field in development expected to come online soon. And thus, we see how fragile the small concession given by OPEC is. Should this field come on line, and at full potential, we are possibly several years away from eating up the massive amount of oil in storage.
By: Ty Chapman
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