Russia ready for new records in oil production

Russia will deliver this year a new record in oil production, leading many experts to reconsider their negative outlook. Russia is stepping up production of the past five years in a row, and stop now would be foolish. Indeed, in the back of her breathing dumping Saudis and Iranians. How long Russia would still be able to keep such a high standard?

Production of Russian oil this year promises once again to achieve a record result for the first time in recent history to make 539-540 million tons. This forecast does RIA “Rating”.

In the first half of the year, oil production in the country has already reached 272.4 million tons, an increase compared to January - June of the previous year by 3.1%. In the second half of the speaker, however, somewhat slow due to the high base effect, but for the whole year growth will be 1.5%.

Russia is stepping up production of the first year. 518 million, in 2013 - - 523 300 000, in 2014 - 523 million in the last year a record production again in 531.4 million. Thus, 511.4 million tons in 2012 were produced in 2011 tons. And this year is no exception. While many oil companies and international experts is expected to fall. However, the forecasts are not in favor of Russia have already become another part of the verbal information warfare.

Thus, analysts of the International Energy Agency, first in Russia waiting for the fall in production this year, but the success of the first half forced them to change their minds. In the August forecast, they are waiting for production growth and the fall in their view, a little delayed and will take place in 2017. OPEC hold the same opinion: in 2017 in Russia with the oil to be trouble.

Analysts at investment bank Merril Lynch in last year’s report was considered that the decline in oil production in Russia will start from 2019, because of Western sanctions will not be able to compensate for oil production decline in mature fields shelf and hard to recover.

Meanwhile, oil production in Russia is growing continuously for five years in a row with a compound annual growth rate of 1.6%, said chief analyst PSB Ekaterina Krylova. The PSB wait for more record result this year: the growth of oil production to 542 million tons and preserve this high level in 2017 (not fall). Zero growth is, as a growing proportion of stranded oil production, that will put pressure on the growth rate, she explains production.

According to her, the growth of production in Russia in recent years has contributed to a number of factors, which are, apparently, the IEA and OPEC blind eye. Firstly, developing new oil fields in the European part of Russia, Eastern Siberia and the Far East. Second, increasing volumes and drilling new wells. Third, Russian companies are actively introducing new technologies and methods to improve oil recovery factor. Finally, it helps the competent tax policy. For example, in Russia there are tax breaks for low-profit fields, fields with hard to recover reserves of raw materials, new promising deposits in Eastern Siberia and the Far East.

Russia is pushing to increase production of its main rival - Saudi Arabia, which is very actively engaged in the production and constantly “on the heels”. “If Russia will reduce the time or do not increase the volume of production, it simply give market share in Saudi Arabia, Iran and other market participants, so relax, Russian oil companies simply can not” - indicates Azret Guliyev IFC “Solid”. Finally, the decline in oil prices is forcing it to sell more to somehow compensate for lost as a result of the depreciation of the double income, he adds.

And, of course, important factors that played in favor of domestic production - is the devaluation of the ruble and the policy of import substitution. “Devaluation component, despite the fact that the Finance Ministry has put a hand, a protective environment, it will save from the conjunctural shocks”, - says deputy director of the National Energy Security Foundation Alexander Pasechnik.

“We are even in some degree better adapted than the number of Arab countries if they have everything in the currency, we have denominated investments due to the devaluation of the exit at the forefront.” - He adds.

In addition, the cost of production in Russia, one of the lowest - about 15-17 dollars per barrel, the points Ekaterina Krylova.

In addition, oil prices have recovered and are already at $ 50 per barrel. “This is 80-90% plus to those lows, which were in January, It’s almost a doubling of the price tag.” - Says Pasechnik.

“The idea is that this year had to show negative, but we are entering a stable, plus national forecast the degradation of the mining potential was not justified, -. Says the source -. Apparently, all came from expectations of $ 30 or even painted the apocalypse in the form of $ 10 per barrel . Because of these horror stories were initially reduced investment. However, there has been some stabilization in world markets, though volatility of risks and saved. But now, quite comfortable price level to plan investments in the medium term. ”

Finally, keep the bar allows the growing demand. “We have no artificial incentive to deter mining potential, and if we hold back, it was only due to natural causes, but the possibility of substitution is sufficient.” - Says oil expert.

“There is a local problem: the decline in production in the Khanty-Mansi Autonomous District, however, and new deposits are still many: Trebsa and Titov, Vankor keeps the level of Rosneft There are growth points, so do not think that we will reduce production..” - Says Beekeeper. And the expected negotiations on the frozen prey Russia hardly believes in September. “The first round has failed, and we realized the futility conclusion gentlemanly deals with the Arabs”, - he says.

Petroleum Concerns about oil production was due to lower investments in the sector, which are needed to replace retiring capacity with new. Last year, investments amounted to 1.1 trillion rubles this year will reach 1.3 trillion rubles.

But that production continued to grow at the level of 1.5-2% per year, Russian oil industry investment in the next few years should grow to 1.5-2 trillion rubles a year, said Eugene Koryuhin of “Alor Broker”. The persistence of such growth rates would allow Russia to reach the mark of 570 million tons per year, that is, the Soviet record in 1988. “Every year the need to increase investment in the sector by 15-20%, associated with the depletion of deposits that are already avoided the expected failure of experts after 2020 in western Siberia. The extraction is always necessary to increase if we do not want to buy gasoline in Saudi Arabia, and bitumen from China “, - said Koryuhin. While the Investment Petroleum plans it considers insufficient.

On the other hand, and whether or not Russia nosebleed fight for a record in 1988? “The tasks to increase production have not really worth it. According to Transneft, expected stable exports, the domestic market is also not growing. And it is necessary to the production and export have grown simultaneously. It turns out that in a situation when demand stabilizes, increase does not make sense . But we are now able to create a reserve capacity that can be used quickly, like the Saudis, “- says Pasechnik.

According to him, within two to three years, oil production will be stable, “if you continue in the same spirit of work, strengthen management decisions and not to go too far with tax policy”.

“I still see only the positive trend. But this is not a reason to relax. If we have a lot of extract, so we have a lot to sell. We must deal with the conquest of export markets, expand the supply to the East in an attempt to counter dumping Saudis, Iran and in an attempt to keep the European zone of influence “- said Pasichnyk. “It is important that China will show After the bet was on large volumes of purchases by China, and it shows the dynamics of the mediocre.”, - The expert says.

Russia came to Asia - to the traditional market of Saudi Arabia - and there is increasing its share, while the share of Saudis remain static (albeit high). On the other hand, the Arabs had already put it in Europe, the main patrimony of Russian oil. Just in August, was the news that Poland rejects Russian Urals oil in favor of Iran. The biggest trader of Russian oil of Urals brand in Poland - Switzerland’s Mercuria Energy Trading - turns its activities and empties containers with oil, Reuters reported, citing sources in the industry. “While this is a special case, as long as it does not become the norm We can not lose to Europe.” - Said Pasichnyk.

26 August 2016

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