Kazakhstan’s state-controlled oil and gas producer KazMunaygaz reported a 64% growth in revenues for the first quarter of 2022, compared with the same period in 2021, due to higher international prices, but officials issued a warning about an expected decline in profitability.
Revenues from upstream, downstream and transportation operations climbed to almost 2 trillion tenge ($4.2 billion) in the first quarter, when oil output rose 3% on a yearly comparison to about 463,000 barrels per day and gas production rose by 8% to over 2.1 billion cubic metres for the whole year, the company said in its latest statement.
KazMunaygaz’ bottom line was boosted by the recognition of its share in the revenues of two major foreign led oil producers in Kazakhstan, Tengizchevroil and Kashagan.
The report said that these two projects, together with several other upstream and transportation ventures where KazMunaygaz has interests, contributed almost 317 billion tenge of revenues to the top line in the first quarter of this year against 142 billion tenge a year earlier.
However, a company executive said the profitability of oil exports shipped via a Russian trunkline to international markets was likely to decline markedly due to the effects of rising costs and tax payments.
The Kazmunaygaz official said his trend was already discernible in the first quarter, when net income attributable to shareholders, moving up by just 9% on the year, to 312 billion tenge, despite the much bigger increase in revenues.
According to the company's quarterly report production costs were up by 32% while tax payments rose by 25% in the reporting period.
However, the main burden on revenues were the higher purchasing costs of oil, oil products and materials, with costs in these categories doubled to almost 1.5 trillion tenge compared with the same period of 2021.
Transit issues with Russia continue
In its quarterly report, KazMunaygaz also acknowledged the bottlenecking effect of shipping restrictions in effect during most of April, when Kazakhstan's main export route to international markets, the Caspian Pipeline, operated at reduced capacity due to the impact of storm damage on two marine offloading buoys.
Speaking earlier in the Kazakh capital of Nur-Sultan, KazMunaygaz deputy executive chairman Dauren Karabayev highlighted continuing challenges in sending the company’s oil production to export destinations even after the completion of repairs at the Caspian Pipeline.
Karabayev, who was quoted by news agency Interfax–Azerbaijan, said that the company had also been forced to accept a double-digit discount on its oil being shipped via the Russian pipeline network, in recent weeks.
KazMunaygaz has traditionally used the so-called Atyrau–Samara legacy export connection that runs from Kazakhstan across the south part of Russia.
The connection enables the company and other Kazakh oil producers to send oil into the Russian oil trunkline network.
The company then obtains same volumes of Russian export blend crude (Rebco) in the Russian ports of Novorossiysk and Ust-Luga and exports them.
The impact of Western sanctions results in Russian Rebco carrying a discount of up to $40 against against the North Sea Brent benchmark Brent since the beginning of this year, Karabayev said.
Earlier reports suggested that major European buyers had been avoiding Russian oil cargoes in expectation of sanctions against the country following its invasion of Ukraine.
That in turn prompted Russian sellers to offer huge discounts to compensate for higher shipping costs to India and other destinations in Asia.
Karabayev said that Kazakhstan has now renamed its barrels to Kazakhstan export blend crude despite that they are being sourced from Russian ports and are similar in quality to the Russian oil.
He added that company’s tax take continues to be linked by Kazakh authorities to the price of Brent despite lower revenues from oil export shipments via the Atyrau-Samara link.