Crossroads Asia

Kazakhstan to Attend the Doha Oil Summit

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Crossroads Asia

Kazakhstan to Attend the Doha Oil Summit

At least Astana will be in the room where it happens.

Kazakhstan to Attend the Doha Oil Summit
Credit: Oil rig via

Kanat Bozumbayev, the Kazakh energy minister, is confirmed to attend a meeting this weekend in Doha, Qatar which will bring together both OPEC and non-OPEC countries to consider an oil production freeze. Bozumbayev is Kazakhstan’s newest energy minister, having taken up the post in late March when his predecessor was dismissed. Earlier reports were not clear whether he would, in fact, attend. And, as I wrote in March–when Russia and Saudi Arabia were discussing an initial freeze–Kazakhstan doesn’t have terribly much clout among the oil giants.

Nonetheless, it’s good for Astana to at least be in the room for discussions that have profound impact on the nation’s economy, even if the meeting results in nothing useful for Kazakhstan.

According to a helpful explainer by Bloomberg, 18 countries–representing 60 percent of world oil production–are planning to send representatives to Doha on April 17: Russia, Saudi Arabia, Qatar, and Venezuela (which have reached a preliminary deal already) and Algeria, Angola, Azerbaijan, Colombia, Ecuador, Indonesia, Iran, Iraq, Kazakhstan, Kuwait, Mexico, Nigeria, Oman and the United Arab Emirates. Notably, Brazil, China, Canada, Norway, and the United States are not going to attend.

Iran, in particular, has opposed a freeze. Having recently returned to the global market after years of sanctions kept Tehran out, the country hopes to increase its oil production.

Bloomberg polled 40 traders and analysts and they were apparently split on whether there would be a deal or not. The impact of a deal is also in question–both Russia and Saudi Arabia are producing at record highs, with “with little scope for increasing output” anyway. Also, previous freeze agreements have failed–in late 2001 “Russia, Mexico, Oman, Angola and Norway promised to cut supply by a combined 500,000 barrels a day… Yet by the middle of the following year, Russia had actually increased output and the only production declines were in Mexico and Norway.” Cheating is a very real possibility.

Nonetheless, the confidence of markets and traders is linked to a deal in Doha. Citigroup predicted, Bloomberg says, that if the countries fail to achieve an agreement oil prices will see a “severe negative impact.”

And that’s really what this is about: avoiding further drops in oil prices and cementing  the recent rally of prices from a low of about $33 per barrel in January to above $40 right now, if not helping prices rise closer to $50. But the long-term view on oil prices remains dour. One of the roots of the oil price crash was the boom in American shale production. Saudi Arabia kicked its own production into high gear in hopes of driving American shale into financial ruin–and thus off the market. But it didn’t work out quite that way; according to Bloomberg, Goldman Sachs says that U.S. shale producers can return to work at $55 a barrel.

Certainly, countries like Kazakhstan–the economies of which are overly reliant on oil revenues–want prices at more than $50 per barrel. The previous energy minister said in February that Astana had contingency plans for prices as low as $16 per barrel and bne Intellinews pointed out that the Kazakh budget does not directly rely on oil revenue. Oil (and gas) revenue goes into the National Oil Fund, “which then releases funds as guaranteed annual transfers – $8bn a year – to the budget.” While the 2016 budget was calculated on oil sitting at $40 per barrel, there’s enough money in the fund to cover even a drastic difference in the short term. But it’s not a sustainable situation — the money in the fund, bne Intellinews explains, would run out eventually.

An agreement at Doha this weekend, while beneficial to confidence and in the short-term, is likely to get more hype than its impact may warrant. Kazakhstan will probably support a freeze, given its output is expected to drop slightly this year anyway. The U.S. Energy Information Administration (EIA) forecasted recently that Kazakhstan’s oil production will drop from 1.73 million barrels per day last year to 1.71 million barrels per day in 2016. Still, this is one less drop in the overflowing global oil bucket. It’s unclear how the possible resumption of production at Kashagan–pegged for this fall–will impact Kazakhstan’s production numbers.