• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 3 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 7 days If hydrogen is the answer, you're asking the wrong question
  • 14 hours How Far Have We Really Gotten With Alternative Energy
  • 11 days Biden's $2 trillion Plan for Insfrastructure and Jobs

Breaking News:

Oil Prices Gain 2% on Tightening Supply

Oil Moves Down on Inventory Rise

Oil Moves Down on Inventory Rise

Crude oil prices inched lower…

OPEC Remains Upbeat About Oil Demand

OPEC Remains Upbeat About Oil Demand

OPEC remains optimistic that the…

Kirill Rodionov

Kirill Rodionov

Kirill Rodionov is a Russian energy analyst based in Moscow.

More Info

Premium Content

The Complete Breakdown Of Russian Output Cuts

Russia oil

The OPEC+ deal, concluded in April amid falling global demand, may lead to a double-digit decline in Russian crude oil production for the first time in more than 25 years. Having increased in 2018 by 1.7% (to 555.9 million tons), and in 2019 - by 0.9% (to 561.2 million tons), the production of oil and gas condensate in the first seven months of 2020 decreased by 6.4% in annual terms, to 304.4 million tons (hereinafter, Refinitiv data is given with reference to the Energy Ministry’s CDU TEK unit). Moreover, in the second quarter, production fell by 10.3% compared to the same period last year (to 124.3 million tons), and in July - by 15.9% (to 39.7 million tons).

The effect of the April agreement is clearly seen in the statistics of daily production provided by the already mentioned CDU TEK (all values presented below are converted by a 7.33 barrel-per-ton ratio). Between March and April, the average daily production of oil and gas condensate increased by 0.4%, to 11.34 million barrels per day (bpd), while between April and May it decreased by 17.1%, to 9.40 million bpd, remaining close to this level both in June (9.33 million bpd) and July (9.38 million bpd).

A Chronicle of the Fall

The same dynamic is typical for the Big Four of the Russian oil industry. Between April and May, Rosneft (excluding Bashneft) and Lukoil reduced production by 15.7% and 20.6%, respectively (to 3.22 million and 1.33 million bpd), while Surgutneftegas and Gazprom Neft (excluding Slavneft) - by 22.7% (to 1.00 million bpd) and 20.1% (to 0.71 million bpd). In June and July, Rosneft produced daily 15% and 12% less than in April, while Lukoil - by 20.8% and 19.6%, respectively, Gazprom Neft - by 20% and 14.7%, and Surgutneftegas - by 23.7% in both months.

Russia’s Crude Oil and Gas Condensate Production, thousand bpd*

 

March 2020

April 2020

May 2020

June 2020

July 2020

Rosneft

3,852.7

3,817.4

3,217.9

3,245.7

3,358.7

LUKOIL

1,643.5

1,672.0

1,327.5

1,324.9

1,344.8

Surgutneftegas

1,219.6

1,295.2

1,001.2

988.2

988.2

Gazprom Neft

803.1

884.9

706.7

707.8

754.5

Tatneft

577.5

487.1

478.9

478.9

478.9

Gazprom

404.0

348.2

314.4

295.6

328.2

Bashneft

378.6

376.0

286.4

248.8

174.9

Slavneft

280.8

296.9

189.7

189.6

142.6

Novatek

161.7

160.2

150.2

147.5

145.8

RussNeft

145.5

141.8

115.7

115.3

115.4

Neftisa

137.3

142.9

109.2

109.2

109.3

Zarubezhneft

68.3

72.7

54.7

54.8

54.8

NNK

41.0

40.4

39.8

39.9

40.2

Dulisma

19.9

19.8

20.0

19.4

ADVERTISEMENT

19.0

YUKOLA-neft

6.9

6.9

7.0

6.9

6.7

Urals Energy

1.5

1.5

1.5

1.5

1.4

PSA operators

392.8

405.6

372.2

348.0

343.8

Others

1,162.8

1,169.1

1,003.4

1,007.2

974.6

Total

11,297.6

11,338.6

9,396.5

9,329.3

9,381.7

* All values are converted by a 7.33 barrel-per-ton ratio

Source: Refinitiv; CDU TEK; author’s calculations

The rest of the industry differs more in terms of production decline. Thus, Tatneft, the fifth largest Russian oil producer, in July produced just 1.7% less per day than in April (479,000 bpd versus 487,000 bpd), while Slavneft, which is owned by Rosneft and Gazprom Neft on parity terms, cut production by more than half during the same period (from 297,000 bpd to 143,000 bpd). For RussNeft and NNK (companies that are at the bottom of the top fifteen largest producers) the dynamics differ just as strongly: the former reduced daily production by 18.7% between April and July (from 142,000 to 115,000 bpd), while the latter cut output by just 0.5% (from 40,400 to 40,200 bpd).

Brownfields VS Greenfields

Which regions contributed most to the production decline? To find out, you need to look at the companies’ subsidiaries. The largest ones operate in Western Siberia, such as RN-Yuganskneftegaz, which cut production by 7.6% between April and July (from 1.35 million to 1.25 million bpd) or Lukoil-Western Siberia and Gazpromneft-Noyabrskneftegaz, which reduced production by 25.2% (from 692,000 to 518,000 bpd) and 32.9% (from 282,000 to 190,000 bpd) over the same period. This also includes the West Siberian fields of Surgutneftegas formally located in the Urals Federal District: between April and July, their production decreased by 28%, from 1.10 million to 0.79 million bpd. Related: String Of Bearish News Shifts Sentiment In Oil Markets

The Volga-Ural oil and gas province, the oldest in Russia, has not avoided a drop in production either. Lukoil-Komi, one of Lukoil’s two local subsidiaries, cut production by 25.2% between April and July (from 336,000 to 251,000 bpd), while the other, Lukoil-Perm, slashed output by 13.1% (from 306,000 to 266,000 bpd). In turn, Orenburgneft, the key subsidiary of Rosneft in the Volga Federal District, reduced production by 39% over the same period (from 279,000 to 170,000 bpd), and neighboring Samaraneftegaz - by 12.2% (from 252,000 to 222,000 bpd). Bashneft-Dobycha, the largest subsidiary of Bashneft operating in the same District, cut production in half (from 328,000 bpd in April to 148,000 bpd in July).

The decline in oil production has not spared three other large regions. The first one is Yamal, where Gazpromneft-Yamal, which is developing the Novoportovskoye field, cut production by 7.5% between April and July (from 160,000 to 148,000 bpd). The second one is Eastern Siberia, where local subsidiaries of Rosneft, RN-Vankor and Verkhnechonskneftegaz, reduced production by 5.9% (from 238,000 to 224,000 bpd) and 5.5% (from 159,000 to 150,000 bpd) over the same period. The third one is the Far East, where Exxon Neftegas Limited, the operator of the Sakhalin-1 PSA project, reduced production by 12.8% (from 262,000 to 228,000 bpd), and Sakhalin Energy, the operator of the Sakhalin-2 PSA project, - by 18.3% (from 108,000 to 88,000 bpd). The operator of another PSA project, Zarubezhneft-Dobycha Kharyaga, which is developing the Kharyaginskoye field in the Nenets Autonomous Region, cut production by 23.9% (from 35,000 bpd in April to 27,000 bpd in July).

However, the drop in production has not affected several fields that were launched recently. This includes the major Prirazlomnoye field in the Arctic, at which Gazprom Neft Shelf increased production by 16.6% between April and July (from 64,000 to 75,000 bpd), as well as the Tagulskoye field in Eastern Siberia, where Rosneft's eponymous subsidiary has more than doubled its production (from 22,000 bpd in April to 47,000 bpd in July), and the Surgutneftegas fields in Yakutia, where production increased by 0.3% (from 198,000 to 199,000 bpd for the same period). But this hasn’t changed the game: between April and July, Russia’s daily production fell by 17.3% (from 11.34 million to 9.38 million bpd).

Production Slide Weighs On Oil Exports

The double-digit output drop has taken its toll on crude exports too. Russia has seen its exports decrease by 8.6% year-on-year in the first seven months of 2020 (from 153.9 million to 140.7 million tons), while in the second quarter they fell by 9.4% (from 65.2 million to 59.1 million tons), and in July - by 25% (from 23.1 million to 17.3 million tons). Coupled with the collapse in prices, this led to a 34.8% decrease in total revenues from crude oil exports in the first half of the year (to $38.9 billion, according to the Federal Customs Service).

As a result, 2020 now seems to be the most difficult year for the Russian oil industry since the early 1990s, when the industry was experiencing a double-digit decline. The COVID-19 pandemic has hit all oil producing nations hard, and Russia is no exception.

By Kirill Rodionov for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News