Russia Hits Post-Soviet Record of 10.74 MMBOPD
Russian oil output hit 10.74 million barrels a day in September, the highest level of production seen in the country since the fall of the Soviet Union, reports The Wall street Journal. The post-Soviet record represented a 0.4% increase from production in August, which reached 10.68 MMBOPD.
The gains were in large part due to foreign-led projects and Rosneft (ticker: RNFTF), according to information from the Russian Ministry of Energy. The ministry’s data showed oil output under production-sharing agreements with foreign firms jumped 10% to 300,000 barrels per day in September from the previous month. The projects include Sakhalin-1, developed by Rosneft, ExxonMobil (ticker: XOM), ONGC and Sodeco; Sakhalin-2 involving Gazprom (ticker: OGZPY), Shell (ticker: RDSA), Mitsui and Mitsubishi; and Kharyaga with Total (ticker: TOT) and Statoil (ticker: STO). The ministry did not give a breakdown of how much production increased on a project-by-project basis.
While lower oil prices resulting from a global oversupply have hurt Russia, which depends on oil and natural gas sales for more than two-thirds of its export revenues, they are not expected to greatly affect production. The Russian government has said that the geology from which it produces and the harsh climate makes it difficult to adjust oil output as easily as in other producing nations. Also, the depreciation of the ruble makes it relatively cheaper to produce oil in Russia, helping to preserve oil-company margins.
Russian Finance Minister Anton Siluanov said oil prices are not expected to recover as quickly as they did following the 2008-2009 crisis, however. His ministry sees oil averaging at $50 per barrel in 2016 and $52 per barrel in 2017.
“The low oil prices have not had any impact on the production plans” in Russia, said Pavel Kushnir, a Moscow-based oil and gas analyst at Deutsche Bank.
The bank estimates that Russian output this year will average around 10.6 million barrels of crude a day. That is above the 10.58 million barrels a day the country produced last year, a level of output not seen since the end of the Soviet Union.
OPEC plans to maintain production
Even as output from Russia steadily edges higher, Saudi Oil Minister Ali al-Naimi said that his country will continue to invest in oil and gas. Naimi said Saudi Arabia remains committed to energy resource development, according to a Saudi Press Agency. OPEC’s largest producer has been producing over 10 MMBOPD for the past few months.
Speaking at a Group of 20 meeting, Naimi called on non-OPEC members to help it “stabilize the market,” indicating that Saudi Arabia does not plan to bear the burden of cutting production alone. “Since the 1970s this industry has been experiencing sharp fluctuations in prices—up and down—which have impacted investments in the field of oil and energy, and its continuity,” Naimi said. “This volatile situation is neither in the interest of the producing nor consuming countries, and the G-20 countries can contribute to the stability of the market.”
Lower oil prices have hit the kingdom hard; with 90% of its revenues coming from oil exports, the country has been forced to pull an estimated $70 billion out of markets in order to help soften the blow. The International Monetary Fund predicts Saudi Arabia will post a deficit of 19.5% of GDP this year following the drop in oil prices.