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Saturday, December 3, 2016

Russia is ready for new records in oil production


Russia will deliver this year a new record in oil production, forcing many experts to rethink your negative predictions. Russia is stepping up production for five consecutive years, and to stop now would be foolish. Because in the back of her breathe dumping the Saudis and the Iranians. How long Russia will be able to hold such a high bar?

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

“The idea this year was to show a minus, but we go on a stable plus. National forecast degradation of mining potential did not materialize,”

In the first half of oil production in the country has already reached 272,4 million tons, an increase over January – June of last year by 3.1%. In the second half of the dynamics, however, will slow down somewhat due to high base effect, but in the whole year growth will be 1.5%.

Russia is stepping up production is not the first year. So, in 2011 it was extracted 511,4 million tons, in 2012 – 518 million in 2013-m – 523,3 million in 2014-m – 523 million last year, again a record production in 531,4 million tons. And this year is no exception. Although many oil companies and international experts had been expecting a fall. However, the forecasts are not in favor of Russia have become another part of verbal.

So, analysts of the International energy Agency first, waiting for the fall of production in Russia this year, but the success of the first half forced them to reconsider. In the August forecast they’re waiting for production growth, and a fall, in their view, the slightly delayed and will occur in 2017. OPEC are of the same opinion: in the year 2017 in Russia with the oil to be trouble.

Analysts at investment Bank Merril Lynch in last year’s report found that the decline in oil production in Russia will begin since 2019, as due to Western sanctions oil companies will not be able to compensate for declining production in old fields with shelf and tight oil.

Meanwhile, oil production in Russia is growing continuously for five consecutive years with a compound annual growth rate of 1.6%, said chief analyst at Promsvyazbank Ekaterina Krylova. PSB are waiting for more a record result this year: oil production growth up to 542 million tonnes, and maintain this high level in 2017 (not falling). Zero growth, as a growing proportion of the production of stranded oil that will put pressure on the growth rate of production, she explains.

According to her, the production growth in Russia in recent years, several factors contributed to that, apparently, the IEA and OPEC turned a blind eye. First, the oil companies develop new fields in the European part of Russia, Eastern Siberia and the far East. Second, the growing volumes of drilling and new wells. Thirdly, Russian companies are actively introducing new technologies and methods to improve the recovery factor of the reservoir. Finally, help of a competent tax policy. So, in Russia there are tax breaks for low-profit fields, fields with hard extractable reserves of raw materials, promising new fields in Eastern Siberia and the Far East.

Pushing Russia to increase production of its main competitor Saudi Arabia, which is actively engaged in production and comes on the heels of”. “If Russia reduces or fails to increase production volumes, it will simply give you the market share Saudi Arabia, Iran and other market participants, so relax Russian oil companies simply can not” – indicates Azret Guliyev from IFK “solid”. Finally, the decline in oil prices forced to sell her more, to somehow compensate for lost as the result of the double devaluation of the profit, he adds.

And, of course, important factors that played in favor of domestic production, is the devaluation of the ruble and import substitution. “Devaluation component, despite the fact that the Ministry of Finance the hand, this protective environment, it will save against market shocks”, – said Deputy Director of the national energy security Fund Alexander Pasechnik.

“We even to some extent better adapted than a number of Arab countries. If they are all in the currency we have investments in rubles due to the devaluation of exit to the forefront,” he adds.

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

Besides, oil prices have recovered and are already at $ 50 per barrel. “It is 80-90% plus to the lows that was in January. This is practically double the price tag” – says beekeeper.

“The idea this year was to show a minus, but we go on a stable plus. The national forecast for the degradation of production capacity is not justified, – says the source. Apparently, everything comes from expectations of $ 30 or even painted the Apocalypse in the form of 10 dollars per barrel. Because of these horror stories were initially reduced investment. However, there was some stabilization on the world markets, although the risks and volatility remain. But now comfortable enough price level to plan investment in the medium term.

Finally, to keep the bar allows the growing demand. “We have no incentive to keep mining potential, and if we hold back, only by natural causes. But while the possibility of replacing sufficient,” says oil expert.

“There is a local problem: the decline in production in the Khanty-Mansi Autonomous district. Nevertheless, new fields are many: Trebs and Titov, Vankor keeps the level in Rosneft. There are points of growth, so I don’t think we will reduce production,” – says beekeeper. In the anticipated negotiations for the freezing of production of Russia is unlikely to believe. “The first round has failed, and we realized the futility of the gentleman’s conclusion deals with the Arabs,” he says.

Fears of oil companies regarding oil production was due to the decrease of investment in the industry, which are needed in order to replace the retiring capacity new. Last year investments amounted to 1.1 trillion rubles this year will reach 1.3 trillion rubles.

But production continued to grow at 1.5–2% per year, investment in the oil industry of Russia in the coming years is expected to grow to 1.5–2 trillion rubles a year, ” says Evgeny Korukhin from “ALOR Broker”. Maintaining such a growth rate would allow Russia to reach 570 million tons a year, that is, the Soviet record in 1988. “Every year it is necessary to increase investment in the sector by 15-20% in order to avoid the expected expert failure after 2020, as the depletion of fields in Western Siberia. Production need to increase always, if we don’t want to buy gasoline from Saudi Arabia and bitumen in China,” – said Korukhin. While the plans of the oil companies for investments he believes are inadequate.

On the other hand, should Russia a bloody nose to beat the record of 1988? Tasks to increase production we have really not worth it. According to Transneft, the expected stable export volumes, the domestic market is also not growing. And it is necessary that production and export grew synchronously. It turns out that in conditions when the demand stabiliziruemost, build makes no sense. But we are now able to create spare capacity which can be efficiently used as the Saudis,” – says beekeeper.

In his opinion, within two to three years oil production will be stable, “if you continue in the same spirit to work hard to strengthen management decisions and not to overreact with the tax policy”.

“I still see only positive trends. But that is no reason to relax. If we produced a lot, so we have a lot to implement. We must deal with the conquest of export markets, to expand the supply to the East in an attempt to counter the dumping of the Saudis, Iran and in an attempt to keep the European zone of influence,” – says beekeeper. “It is important that will China. Because the rate was for large volumes of purchases by China, and it shows mediocre dynamics,” – says the expert.

Russia came to Asia for the traditional market of Saudi Arabia and increases its share, whereas the share of Saudis remain static (though high). On the other hand, the Arabs have already put it in Europe, home turf of Russian oil. Literally in August was the news that Poland rejects Russian Urals in favor of oil from Iran. The largest trader of Russian oil Urals in Poland – the Swiss company Mercuria Energy Trading – winding down its operations and empty reservoirs of oil, reported Reuters, citing industry sources. “While this is a special case, as long as it does not become the norm. We can’t lose Europe,” – says beekeeper.

source

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