Russian crude oil production in September rose to a new high of 11.11 million barrels per day, up 4 percent on August, figures from the Energy Ministry showed. Production will continue to grow next year as well, according to UBS analysts quoted by Reuters.
At the forefront of the rise were giants Rosneft, which recorded a 2.6-percent production increase last month, and Gazprom Neft, which did even better, raising output by 5.2 percent. Conventional fields accounted for the bulk of overall production but non-conventional deposits’ contribution also expanded, despite Western sanctions concerning technology and know-how about shale oil and gas extraction.
Russia’s all-time record daily output was achieved in 1988, during Soviet times, and stood at 11.41 million bpd, Reuters notes.
The September rise, which reflected a bit better international oil prices, came amid talks with OPEC on capping production, which Russian Energy Minister Alexander Novak said the country is ready to do if it reaches an agreement with OPEC. For now, the question remains hanging, which could be a big part of the reason Russia is doing its best to pump as much as possible – a production cut is not on the table at the moment, so making sure the ceiling is as high as possible is a tactic that would make sense for Russia, just as it did for Iran.
Meanwhile, Russian oil companies are demonstrating a surprising resilience: in S&P Platts’ latest Top 250 Companies for 2016, there were four Russian E&Ps in the top 10: Gazprom, Lukoil, Rosneft, and Surgutneftegaz.
In an article for the Financial Times, Citigroup’s chief Russia analyst Ronald Smith notes that in this situation, no one should bet big on Russia joining the market rebalancing efforts of OPEC. Its oil industry, Smith pointed out, has mechanisms that make it possible for players in the field to withstand “almost any price environment.” He added, however, that the increase in production will start slowing down in the months to come, as the current rate of increase is unsustainable.
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.