Kazakhstan, OPEC+, Algeria and Global Oil Markets

In this interview with Cyba Audi from Asharq Business Bloomberg, Dr Carole Nakhle, CEO of Crystol Energy, discusses the unrest in Kazakhstan, OPEC+’s decision and what to expect in global oil markets in 2022

Kazakhstan is an important oil producer with about 1.5% of total global supply. However, the protests are unlikely to cause major disruptions to global oil supplies. The more concerning aspect is that consumers are very sensitive to energy prices – today even more so – given the economic hardship.

An OPEC+ member, Kazakhstan has struggled to be compliant with the group’s requirements, just like Nigeria and Angola. The latter, in particular, has been struggling for years to attract capital, irrespective of the oil price, given existing policies which have not been quite attractive for international investors.

As for OPEC+’s decision to maintain regular increase in supply, Dr Nakhle stresses on the fact that we should look at the bigger picture, particularly the growth in oil demand which in turn continues to be impacted by economic growth. The impact of Omicron has been milder than originally feared and restrictions on mobility more limited, which explains the improved expectations about oil demand growth. However, looking further ahead, while economic growth is expected to be maintained this year, it is likely to slow down. As long as vaccination is not evenly spread around the world, we will continue to experience significant uncertainty.

Commenting on Sonatrach’s $40 billion investment plan, Dr Nakhle highlights that investments in the oil and gas industry are affected by several drivers. The oil price plays a major role. There is also the cost of investment; recently, investors in US shale complained that they are suffering from escalating costs of production. Then, there is the country’s policy – regulations and taxation, among others. Algeria has struggled to attract investment even when oil prices where above $110 per barrel due to ‘investment unfriendly’ legislation. Although the government has reformed some of its policies and regulations, more needs to be done as the country faces tougher competition for capital, particularly today. Assuming all the investment announced goes ahead, it will still take at least 5 to 7 years to have an incremental effect on world supply.