LONDON, May 14 (Reuters) - Kazakhstan opened on Tuesday

a thorny debate on OPEC+ production levels, saying it believed

it should be allowed to pump more oil in 2025, when all current

output cuts by the producer group are due to expire.

Kazakhstan's comments reported by Interfax come as OPEC+

prepares to meet on June 1. The group has also ordered a review

of members' oil output capacity to set reference production

levels for next year. The review is due by the end of June.

The subject of reference production numbers and quotas has

often caused tension at OPEC+, affecting its unity and weighing

on oil prices. The last showdown happened in November 2023 when

OPEC+ delayed a meeting by several days due to heated

discussions and member Angola left the group.

OPEC+ has tasked three companies - IHS, Wood Mackenzie and

Rystad Energy - to assess the capacities of all members to be

used for reference production - the figures from which output

cuts or increases are calculated - from 2025. The reviews are

due to take place by end-June.

As a result, the issue will not come up at the June 1

meeting, five OPEC+ sources said, allowing the group to decide

policy for the rest of 2024 with more ease. But it also means

the June meeting will not give the market much guidance on

policies for 2025, when all current cuts expire.

"The figures on production capacities will not be presented

at the June meeting," said one of the OPEC+ sources, who

declined be identified. "The reason is that some countries have

not fully concluded their discussions with secondary sources".

OPEC and Woodmac did not immediately respond to a Reuters

request for comment. Rystad and IHS declined to comment.

Following the Interfax report, Kazakhstan's energy ministry

said it had not requested a higher oil production level for

2025.

The need for new quotas comes as members, such as the United

Arab Emirates and Iraq, expand their production capacity while

the biggest OPEC producer, Saudi Arabia, has this year scaled

back additions to its output potential.

Top OPEC+ member Russia has effectively seen its production

capacity reduced by the war in Ukraine and Western sanctions.

Oil is the main source of income for most OPEC+ members but

their budget needs differ wildly making them either supporters

of higher oil prices amid lower production or higher production

amid lower prices, which complicates discussions.

The UAE has long lobbied to raise its output within the

OPEC+ agreement and this month it announced another hike in its

oil capacity to 4.85 million barrels per day (bpd) - almost 2

million bpd higher than its current production target.

The UAE should gain up to 180,000 bpd of more capacity

through 2027, while Kazakhstan is in the middle of deploying

80,000 bpd of new capacity, JP Morgan estimates. Iraq can add

another 50,000-75,000 bpd.

Meanwhile, Saudi Arabia scrapped plans earlier this year to

boost its capacity to 13 million from 12 million bpd. Its oil

monopoly Saudi Aramco has also been paying a special

dividend to the government amid rising budget needs.

BUDGET NEEDS

OPEC+ has made a series of output cuts totalling 5.86

million bpd since 2022 amid rising output from the United

States, an uncertain demand outlook as major economies tackle

high interest rates and support the use of cleaner fuels.

At its June meeting, OPEC+ faces the more immediate issue of

deciding whether to extend 2.2 million bpd of voluntary cuts

beyond their expiry in June. The rest of the cuts amounting to

3.66 million bpd are valid until the end of 2024.

Some OPEC+ sources and analysts expect the voluntary cuts to

be extended.

"OPEC's keeping production targets unchanged does not

address 2025 imbalances, especially as some of the OPEC members

will see their production capacities increasing next year," JP

Morgan said.

The International Monetary Fund estimates Saudi Arabia needs

oil at $96.20 this year to balance its budget, falling to $84.70

in 2025. Iraq's budget needs $90 oil next year and Algeria and

Kazakhstan prices well above $100.

By contrast, the UAE's budget needs lower prices of $56.70

in 2024 and slightly lower in 2025.

"Spending is rising faster than non-oil income, which by

definition means the Kingdom's reliance on oil receipts is on

the rise," said Simon Williams of HSBC ( HSBC ), referring to Saudi

Arabia.