Coronavirus to adversely affect the Caspian region oil market

NUR-SULTAN, Kazakhstan – Coronavirus pandemic and drop in oil prices adversely affected the oil industry in the Caspian region, a Russian expert on oil and gas projects in the Caspian region, Igor Ivakhnenko, told New Europe in an interview.
“As we can observe, many cities and countries are closing their borders. Where possible, employees are transferred to remote working, they do not go to the offices, hence, they do not need to buy gasoline. But this has more psycho-emotional consequences, because the volume of freight traffic is reduced to a much lesser extent. And the volume of goods flows has always been more significant than passenger flows. At the same time, many experts believe that coronavirus is a kind of ‘reason’ to reduce the volume of the global economy, which was artificially inflated by large dollar interventions after 2008,” Ivakhnenko said, noting that developed industrial countries are “sacrificing” the economies of commodity states. “This version has many arguments, and, of course, it is very alarming for both: Russia and Kazakhstan. But we must not forget that the large oil companies – BP, ExxonMobil, Shell are also ‘native’ from industrial countries, and they defend their interests, and hence the oil industry as a whole,” he said.
Ivakhnenko said China has stopped importing both pipeline gas and CNG (condenced natural gas). “Russia’s Power of Siberia gas pipeline is closed for repairs. I expect the same for the Asian gas pipeline which goes through Central Asia to China. If Kazakhstan fails to persuade Gazprom to increase purchases of Kazakh gas, then its production will have to be reduced. As for oil, Kazakhstan sends to China a little more than one million tons per year, so the Chinese decline in demand in this sector is of little importance for Kazakhstan,” he said.
Turning to Iran, Ivakhnenko said the country is in extremely difficult situation. “The traditional buyer – China has reduced imports of Iranian oil, Turkey almost stopped buying gas. US anti-Iranian sanctions prevent this country from buying medicine. Tehran even seeks medical help from Russia. Azerbaijan is in better situation Azerbaijan: the country is not oppressed by sanctions, it is located close to sales markets and open seas, and has a developed oil transportation infrastructure. The state-owned company SOCAR has been actively investing in refining projects and now exports oil, oil products, and methanol. Gas does not bring Azerbaijan large foreign exchange earnings, due to the fact that production on Shah Deniz is too expensive, and the construction of the Southern Gas Corridor required a lot of money,” he argued.
Regarding the situation in oil and gas sector of Turkmenistan, Ivakhnenko said this country has twofold situation. “On the one hand, petrochemical products are exported and also sold to local small and medium-sized businesses. On the other hand, the volume of these sales is less than the plant capacity. Turkmens are harmed by European market restrictions. In addition, Ashgabat is now concerned about the sale of its natural gasoline, and this indicates that the fuel market in Central Asia and Afghanistan is becoming crowded,” he argued.
Asked how the situation in the Russian oil and gas sector can affect Kazakhstan, Ivakhnenko said he does not think that Russian vertically integrated oil producing companies will sell their oil at artificially lowered prices, intercepting customers from Kazakh suppliers. “The ruble and tenge are devaluing at the same pace, so gasoline will not have any new incentives to flow in any direction. But there might be problem with selling Kazakh gas to Europe through KazRosGas. Europe is now overwhelmed with methane supply, and until the situation is balanced, there might be no demand for Kazakh gas,” he said, adding, “As the case, Russia does not need it either, since there is a methane oversupply in Russia.”