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Russian oil companies will cut their output proportionately to their share in Russia’s total daily production of crude, Energy Minister Alexander Novak told media after meeting with 12 industry representatives.
This means that Rosneft, which is the largest of them all, will cut the most, followed by Lukoil, the country’s second-largest oil producer, Gazprom Neft is the third, Surgutneftegas the fourth, and the top five producers’ list is completed by Tatneft.
Rosneft pumped an average of 4.1 million bpd in the third quarter this year, which means that the company will not really feel its share of the 300,000-bpd overall cut pledged by Novak to OPEC.
Lukoil, which reported average daily output of 2.2 million barrels of oil equivalent for January-September, is also unlikely to feel any significant impact from its participation in the cut.
The two companies together account for about half of Russia’s total oil production, which in November reached 11.23 million bpd, a post-Soviet record. It is from this figure that the 300,000-bpd cut will be taken out.
At the same time, Novak said that for next year, average daily production is seen at between 11.01-11.07 million bpd, as projected earlier this year. The minister also said that in addition to the discussions with the 12 companies, separate talks will be held on production-sharing agreements with foreign energy companies, such as Shell and Exxon.
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All in all, it looks like the Russian oil industry will not be largely affected by the 300,000-bpd cut, especially if we factor in the seasonal draw in output that takes place every spring, and which amounts to 150,000 bpd.
Meanwhile, doubts are growing that OPEC members will stick to their new, smaller quotas: a recent IEA report on the group’s production in November revealed that the initial 1.2 million bpd cut agreed by the members has, thanks to November production rates, risen to 1.7 million bpd if they are to stay under the 32.5 million barrel-per-day cap.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.