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Editorial Dept

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How OPEC Can Boost Its Spare Capacity

Oil

Wherever OPEC Secretary General Mohammad Barkindo went this week, he emphasized the importance of building up a sizable spare capacity cushion as a safe way to help the global oil markets weather any external shocks. The problem is by no means new, as we discussed two weeks ago Saudi Arabia has been looking into diplomatic ways how to ramp up production without hurting the sustainability of its production – it is a remarkable development given that for years Saudi Arabia’s 2 mbpd spare production capacity was perceived as a lifebuoy for any market irregularity. However, where does that leave other members of the OPEC+ agreement, why is it that countries like Russia, Iraq or the United Arab Emirates remain without a sizable spare capacity despite their resource wealth? Or is their spare capacity simply underreported? Let’s take a look.

Russia is a peculiar case for anyone who analyzes spare production capacities in that up to late 2017 it always produced as much as it could. How did it happen? Well, even after Moscow joined the OPEC/OPEC+ agreement in November 2016, it never really jeopardized the fate of greenfield projects that took many years to commission and several hundred million, if not billions, of dollars to finance. All the greenfield projects that were scheduled to come online in 2016 – Vostochno-Messoyakhskoye (140 kbpd peak production rate), Suzunskoye (100 kbpd), Vladimira Filanovskogo (120 kbpd), Pyakyakhinskoye (30 kbpd) –…




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