Russian H1 oil output falls first time in decade

MOSCOW - Russian oil output edged up 0.3 percent in June from the previous month, but was down almost 1 percent in the first half of the year, casting further doubts over the government's goal to sustain growth this year.



By (Reuters)

Published: Wed 2 Jul 2008, 4:19 PM

Last updated: Sun 5 Apr 2015, 12:40 PM

Russian officials still hope production would slightly rise this year as the government seeks to avert the first annual decline in output since 1998.

But analysts say Russia cannot sustain production growth, at least not until next year when new fields in East Siberia will come onstream to compensate for falling production from depleted deposits in West Siberia.

Stagnant Russian production has been a concern for global oil markets in the past year. Crude prices are at record highs over $140 a barrel and the International Energy Agency predicts that supplies will fail to keep up with demand in the long term.

The decline also comes as Russia's No.3 oil producer TNK-BP, half owned by BP, warns that its output growth is at risk this year due to a protracted corporate conflict between BP and its Russian billionaires co-owners over the firm's strategy and management tactics.

EYES ON SECOND HALF

Energy Ministry data showed on Wednesday that Russian oil firms produced 9.77 million barrels per day, or 39.999 million tonnes in June, slightly up from 9.74 million bpd in May, and down by 0.8 percent from 9.85 million bpd in June last year.

Production stood at 9.76 million bpd (242.396 million tonnes) in the first half, down 0.9 percent from 9.85 million bpd in the same period last year.

Oil production in Russia has fluctuated between decline and stagnation since the beginning of the year, prompting many analysts to revise down their oil production forecasts for 2008.

Russian authorities still expect production to grow by around 1 percent this year after an increase of 2.3 percent in 2007 and much bigger spikes in previous years, including a record 11 percent in 2003.

Analysts expect production to slightly recover in the second half of the year, when a number of new fields will start operating, but they say it will not be enough to achieve a full-year growth.

‘The second half will be more successful, because LUKOIL has just launched its South Khylchuyu field and the Asian pipeline will start taking oil from Surgut's Talakan and TNK-BP's Verkhnechonsk,’ said Konstantin Reznikov from Dresdner Kleinwort.

LUKOIL, Russia's second-largest oil producer, plans to produce 7.5 million tonnes (over 150,000 bpd) from the deposit in the northern region of Timan-Pehora in 2009. Output plans for this year are not yet clear because the field has yet to reach full production levels.

Talakan and Verkhnechonsk will produce just 220,000 tonnes between September and the year-end, when Russia's pipeline monopoly Transneft will be ready to pump oil westward via a completed part of its unfinished pipeline to China.

‘But growth is unlikely this year. The maximum that oil companies can do is to achieve flat output (versus the previous year),’ said Reznikov.

He added that growth of some 2 percent can be expected next year, when Russian top oil producer Rosneft starts up its Vankor field in East Siberia and TNK-BP boosts production from its West Siberian Uvat deposit.

On the export front, supplies via Transneft fell by 5.9 percent in June to 4.196 million bpd (17.175 million tonnes) from 4.458 million bpd in May.


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