Crude oil and condensate production in Russia hit a record high for the post-Soviet era in 2019, despite Moscow's key role in supporting the ongoing production cuts of the OPEC+ coalition.
According to figures from Russia's energy ministry, carried by Reuters, Russia pumped 11.25 million barrels per day (bpd) of crude oil and condensate in 2019-up from 11.16 million bpd in 2018, which was the previous production record in Russia's post-Soviet era.
The new record oil production shows that one of the key parties to the OPEC+ deal, and certainly the key party in the non-OPEC camp of producers in the agreement, did not comply with its share of the cuts for most of 2019.
Russian oil companies have long balked at continued production cuts, arguing that the cuts give more market share to U.S. shale and hinder Russian firms' production expansion plans.
Russia's excuses for regularly exceeding its cap varied from harsh winter conditions early in 2019, to the crisis with the contaminated pipeline oil in the spring and the following need to increase production, to the rise of gas condensate production, which Russia argued in November should be excluded from the production numbers when calculating Moscow's compliance with the deal.
At last month's OPEC+ meeting in Vienna, Russia agreed to deepen its own cuts by 70,000 bpd in the first quarter of 2020, but it managed to have its condensate production out of the equation, thus showing that it actually complies with the cuts.
Removing condensate from the level of compliance would make Russia's compliance record look more acceptable to OPEC's leader and key partner in the deal, Saudi Arabia, which is pushing for all rogue producers in the pact to fall in line with their quotas.
The Russian energy ministry's statistics do not break down crude oil and condensate production, but the ministry will regularly provide that breakdown to analysts, media, and OPEC, Russia's Energy Minister Alexander Novak has said, according to Bloomberg.
By Tsvetana Paraskova for Oilprice.com
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Comments
Russia pumped 11.438 million barrels a day (mbd) of crude oil and condensate in 2018 according to the 2019 BP Statistical Review of World Energy compared with 11.25 mbd in 2019. This means that Russia’s oil production average in 2019 was 2% less than in 2018 due to its compliance with the production cuts under the OPEC+ agreement.
It is no secret that Russia as one of the world’s most advanced industrial countries doesn’t need the OPEC+ production cuts as its economy can live with an oil price of $40 a barrels or even less compared with a price higher than $80-$85 for OPEC members.
President Putin has engineered with Saudi Arabia the production cuts mostly as a favour for the benefit of the OPEC members to help bolster oil prices and enhance their revenues. Nevertheless, the Russian budget has earned a few billions more from the stabilization of the oil prices in addition to the geopolitical benefits that Russia has been gaining in the Arab Gulf at the expense of the United States.
Still, Russian oil companies aren’t in favour of any cuts since they have been investing heavily in production expansion particularly in the Arctic and they need a quick return on their investments. Furthermore, they argue that that the cuts give more market share to US shale.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London