Kazakh travails

Think Kazakhstan and you may well think Kashagan — delay following delay, the bathos of the start up and immediate shutdown, the eye-watering pipeline replacement costs, and a breakeven price of $100/bl in a $50/bl environment. All very sad for the shareholders of Eni, Shell, ExxonMobil, Total, and Japan’s Inpex, as well as for Kazakhstan’s production target.

But spare a thought for the overseas independents operating in Kazakhstan. True, Dubai-based Dragon Oil remains in rude health with higher 2014 production and maintained guidance of 100,000 b/d by the end of 2015, an improved marketing arrangement, and that ever burgeoning cash pile.

But Nostrum Oil and Gas, which is big enough to be a FTSE250 company, has backed away from a target of doubling production by the end of 2016. In 2014, it produced some 44,400 b/d of oil equivalent (boe/d). It now says 2015 and 2016 output will be flat against last year, rising to 70,000 boe/d in 2017. The revised targets may be revisited if oil prices take a further dramatic turn.

The minnows with a London-listing are having a rough time of it. Max Petroleum, with some 4,000 b/d of production, said today that it “continues negotiations with Sberbank regarding an appropriate debt restructuring and with AGR Energy regarding an equity investment that, together with the debt restructuring, would render the company viable at current oil prices”. But it warned of “upcoming creditor payments, including a material amount that becomes due on 25 February 2015 to the Kazakh tax authorities and payable by early March 2015”.

Kazakhstan is not the only string to Tethys Petroleum’s bow (although it is trying to farm out or sell its interests in Georgia). And it said in its last corporate update that it had yet to fully feel the icy blast of the crude price collapse. Increasing gas sales rather than crude will provide a little cover and lower seasonal production will delay the full effect. Nonetheless, employee numbers in Kazakhstan, where the Doris discovery is producing around 2,000 b/d, have been axed and planned spend reduced.

Today, Jupiter Energy called it a day, saying low domestic oil prices and low demand from local refineries had persuaded it to shut in its few hundred barrels a day of production. It will restructure to cut costs by 40pc. Once the price recovers, output will restart, the firm said. But it doesn’t expect that to happen until at least the fourth quarter.

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