Low prices to take their toll on Kazakhstan’s oil and gas sector

NUR-SULTAN, Kazakhstan – Oil services companies in Kazakhstan will face a large reduction in jobs, Kazakhstan’s Association of Oil Services Companies Chairman Rashid Zhaksylykov said on 18 March.
“There is a volatile situation in the global oil market. The coronavirus pandemic provoked a sharp decline in oil demand from China, one of the world’s largest consumers of hydrocarbons. Over the past two years, oil has provided more than 1 trillion tenge ($ 1 – 439, 32 tenge) to the budget of Kazakhstan. When oil prices fall to $25, the export customs duty will reach zero and revenues from oil companies will be zero,” Zhaksylykov told a press briefing. “In current oil prices, Kazakhstan’s budget deficit may amount to 1.2% of GDP, and treasury revenues from oil and gas exports will be reduced by 3 times. The main task facing us is to preserve jobs,” he added.
Given the low oil prices, the risk of a large number of unemployed in the oil and gas industry remains, he opined. Today, over 2,000 companies are represented in the country’s oilfield services, with about 200,000 employees. Improvement of the situation on the world oil market is not expected in the next three to four months, or maybe even within two years.
“Speaking objectively, the reduction of vacant places may affect not oil and gas enterprises and their direct contractors, but primarily oil service companies of Kazakhstan. In particular, this will be associated with the completion of work on projects and budget cuts in oil and gas companies. For example, this summer about 5,000 people will lose their jobs on the project for the future expansion of TCO (TengizChevroil),” Zhaksylykov said.
He believes that in order to maximise the preservation of jobs and reduce social tension in the regions, a number of important measures should be taken.
“We suggest that the government consider such a measure as transferring contracts of up to $100 billion to Kazakh companies, and transferring contracts worth more than $100 billion to joint ventures,” Zhaksylykov said.