Russia Is Pumping Oil at Its Fastest Pace Since the Soviet Era

EghtesadOnline: Russian oil output rose to a record ahead of talks on supply with Saudi Arabia and other members of the Organization of Petroleum Exporting Countries next week.

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24 September 2016

Output in September has been about 11.09 million barrels a day, the highest monthly average since the Soviet era, and reached about 11.18 million on Tuesday, Energy Ministry data show. Maintenance at Sakhalin Island in August capped output that month at just over 10.7 million barrels a day, according to Bloomberg.

Russia will meet fellow oil producers in Algiers on Sept. 28 to discuss the market as the global crude surplus keeps prices below $50 a barrel. President Vladimir Putin said Sept. 1 he’s confident producers can overcome differences that derailed a proposal to freeze supply in April. Yet the start of new Russian fields shows the country is keen to squeeze as much revenue from its oil resources while it can.

“Russia keeps posting new record highs because neither Russia nor OPEC managed to agree upon freezing,” said Alexander Kornilov, an oil analyst at Aton LLC. “Production is profitable.”

Putin Stance

The April agreement collapsed when Saudi Arabia insisted on the participation of Iran, which refused to join as it ramped up output following the removal of international sanctions. Putin has said he’d like Russia and OPEC to reach an accord on freezing supply while exempting Iran until it restores production to pre-sanctions levels.

Russia would be ready to cap output at the level of any month in the second half of this year, Energy Minister Alexander Novak said two weeks ago in China.

Russian oil producers have been able to weather the commodities rout as a weaker ruble reduced costs and taxes eased with lower crude prices. That has helped support output at existing projects as new fields come on line.

Putin on Wednesday oversaw the start of Siberia’s East Messoyakha oil field, run by Rosneft PJSC and Gazprom Neft PJSC. The deposit is expected to produce 577,000 tons of oil this year and reach a peak of 5.6 million tons, or 112,000 barrels a day, at the end of the decade, according to the Kremlin.

Rosneft, Russia’s largest oil producer, also plans to start its Siberian Suzun field in a month’s time, Chief Executive Officer Igor Sechin said Wednesday. The company expects output from the deposit to peak at 4.5 million tons of oil, or 90,000 barrels a day, in 2017, according to a presentation last month.

Russia’s second-largest producer, Lukoil PJSC, started test production at the Caspian Sea’s Filanovsky field at the beginning of August, pumping 20,000 barrels a day, it said Aug. 30. The company’s press service didn’t immediately comment on Filanovsky’s current output when contacted on Wednesday.