x Abu Dhabi, UAEMonday 24 July 2017

Russia's oil production bucks trend to hit post-Soviet record

Russia pumped more than 10 million barrels per day (bpd) of crude last month, a level not bettered since the collapse of the Soviet Union in 1991.

Russia pumped more than 10 million barrels per day (bpd) of crude last month, a level not bettered since the collapse of the Soviet Union in 1991. Thew new record consolidates Russia's position as the world's largest oil producer. Russian output rose to 10.01 million bpd from 9.97 million bpd in August and from 9.84 million bpd the previous September, the country's energy ministry reported at the weekend.

The strong showing put Russia 25 per cent ahead of its nearest rival, Saudi Arabia. Amid a sharp contraction in global oil demand because of the recession, Russia has increased its oil output in recent months after it fell last year for the first time in a decade. The latest monthly increase follows the start of production in August from the huge Vankor field in the Siberian Arctic. According to the US consulting firm, Cambridge Energy Research Associates, Vankor may prove to be among the world's 10 biggest oilfields. Its developer, Rosneft, a Russian state-controlled oil company, plans to pump 220,000 bpd from the field by the end of this year and projects peak production of 510,00 bpd.

But Russia has increased it market share at the expense of Arab Gulf oil producers, including Saudi Arabia and the UAE, which have been pumping oil at well below their capacity this year in order to bolster the international market. Saudi Arabia, which remains the world's biggest exporter of crude, has recently pumped about 8.1 million bpd, in keeping with its OPEC quota. Late last year, the group pledged to trim a record 4.2 million bpd of output to stem a steep price slide.

As a result, the kingdom and other OPEC members that have adhered to the lower quotas have foregone billions of dollars in revenue, while Russia has benefited to the tune of about US$20 billion (Dh73.4bn), according to analysts' calculations. But some analysts already see Saudi Arabia regaining its position as the world's top oil producer, as it has recently expanded its output capacity to more than 12 million bpd. They say Russia's output may be unsustainable in the face of declining production from several giant oilfields in western Siberia.

"The pick-up seen today is the result of prior years' investment. It's only sustainable until new fields reach a plateau," Chirvani Abdoullaev, the senior oil and gas analyst at Alfa-Bank in Moscow, told Reuters. Russia nevertheless recently overtook Saudi Arabia as the world's biggest combined exporter of crude oil and refined oil products with total exports in the second quarter averaging 7.4 million bpd compared with Saudi exports of about 7 million bpd.

Russia is also the undisputed world leader in gas production and raised its gas output last month by 8.6 per cent from August's level to 1.52 billion cubic metres per day, according to government data. @Email:tcarlisle@thenational.ae