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Oil output

Renaissance Capital

20 June 2019

Russian oil & gas

Russia’s most recent peak in oil output was in 1987, when output stood at 11,484kb/d, and accounted for 18.9% of the world total. Russia was the largest oil producer in the world then, well ahead of the US (which produced 9,900kb/d) and Saudi Arabia (4,600kb/d). It was also the world’s largest exporter of liquid hydrocarbons in 1988, when it delivered an estimated 205mnt to export markets.

In 2009, Russia regained the top spot, which it maintained in 2010 with average production of 10.15mnb/d, 2.0% ahead of Saudi Arabia’s 9.96mnb/d – Russia’s production accounted for 12.3% of the world total. In 2011, Russia again moved to second place, with total crude output of 10.64mnb/d (accounting for 12.8% of the world total), 7.7% below Saudi Arabia’s 11.6mnb/d. In 2014 Russia slid to third place, with its production of 10.84mnb/d overtaken by the US with 11.78mnb/d production.

In 2018, Russia continued to hold third place, having produced 11.44mnb/d, below only Saudi Arabia, which produced 12.29mnb/d, and the US, which has solidified its first place with total production of 15.31mnb/d. In 2018, Russia’s total exports of liquids (including oil products) to non-CIS destinations reached 381mnt (242mnt of crude, 139mnt of products), and were the second largest in the world. Saudi Arabia held first place with 424mnt.

In the late 1980s and throughout most of the 1990s, the Russian oil sector experienced a protracted crisis caused by the disruption of Soviet commercial and technological links, and an economic slump at home. Importantly, severe underinvestment, which has often been blamed for the downturn in Russian oil output, was the effect, rather than the cause, of the slump in demand, in our view. Most production indicators declined sharply until 1996, the beginning of a three-year trough. From 2000, an increasingly vigorous recovery took place that lasted for several years.

Russia’s crude output growth began to slow markedly from mid-2004, before entering negative territory at the start of 2008. The breakup of Yukos was the principal cause, but the slowdown was fairly widespread, reflecting poor or paralysed policy in a number of important areas, in our view.

However, things started to reverse in early 2009, when crude output started rising again, after 14 consecutive months of decline. The launch of new fields (Yuzhno-Khulchuyskoye, Uvat, Talakan and Vankor) as well as the ramp-up of production at Sakhalin-2 helped to push growth to 2.2% in 2010. The growth rate averaged 1.1% over 2010-2015 and increased to 2.5% in 2016, as the next wave of greenfields such as Filanovskogo, Suzun, Pyakyakhinskoye, Novoportovskoye and Prirazlomnoye contributed to production growth. A key event in 2016 was the oil output cut agreement with OPEC countries, whereby Russia committed to a 300kb/d production cut from the reference level of November 2016 (11.3mnb/d). Russia delivered on this promise and in 2017 Russian production was down 266kb/d, or 2.4%. Following the relaxation of OPEC+ quotas in June 2018, Russia reached a new post-Soviet record in production of 11.45mnn/d in December 2018. On 7 December 2018 OPEC+ countries agreed to a further 1.2mnb/d output cut and a six-month production freeze. Russia’s share of the production cut was reported at 228kb/d, reflecting a 2.0% reduction vs the October 2018 actual output.

Russia is the third-largest oil producer in the world, and the second-largest exporter of liquids (including oil products)

Peak production of 11.45mnb/d was reached in December 2018, helped by new oil fields and relaxation of OPEC+ quotas

Figure 5: Russian oil industry indicators, mnt

	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Oil output	352	384	426	463	475	486	497	494	501	512	519	527	532	535	542	556	554	563
Domestic consumption	127	122	126	125	125	130	130	134	128	133	142	145	144	152	144	148	146	146
Non-CIS oil exports	140	155	175	207	204	217	214	205	211	213	214	213	208	199	222	236	235	242
Exp drilling, km	1144	721	681	583	627	723	867	852	464	701	747	804	817	994	818	914	988	1,067
Dev drilling, km '000	9.0	7.7	8.6	8.4	9.2	11.6	13.8	14.6	14.1	16.5	18.0	20.0	20.8	19.8	22.1	24.7	27.6	27.6
Idle well count, '000	31.5	36.1	36.3	36.8	30.0	27.2	25.8	25.4	25.9	22.5	22.4	22.2	21.6	22.0	21.5	21.6	24.6	22.4

Note: Domestic consumption includes refinery fuel and losses.

Source: BP’s Statistical Review of World Energy 2019, InfoTEK, Federal Customs Service

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Figure 6: World oil consumption, mnt

		North America										Other										Europe & Eurasia
		Russia										Asia Pacific										Middle East
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018

Source: BP’s Statistical Review of World Energy 2019

Figure 7: Worldwide trade flows of crude, mnt

Renaissance Capital

20 June 2019

Russian oil & gas

Source: BP’s Statistical Review of World Energy 2019, Renaissance Capital

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