Russian oil supply is expected to increase by 20 tb/d to average 10.69 mb/d in 2015, revised up by 10 tb/d from the previous MOMR.
Oil output declined in July by 70 tb/d to average 10.70 mb/d due to maintenance at Gazprom’s Surgut gas condensate plant. Nevertheless, 3Q15 was unchanged at 10.6 mb/d but lower by 160 tb/d than strong 2Q15 at 10.76 mb/d. Bashneft, Russia’s sixth largest crude producer, increased crude output 10.4% y-o-y in the second quarter to an average above 389 tb/d, making the company Russia’s fastest growing oil producer.
Bashneft’s average daily oil output was the highest it had been since 1993 on the back of a 2.5% rise at brownfields due to new wells and efficient operations, as well as output at the Trebs, Titov and Sorovskoye fields, which accounted for 14.6% of overall production in the second quarter. Bashneft’s output, alongside rising condensate production, is driving production growth in Russia, which was up by 1.2% in the first six months of the year to reach 10.545 mb/d, according to energy ministry data.
July exports rose m-o-m to 4.52 mb/d, higher y-o-y by 0.69 mb/d, for the seventh straight month. Exports to Asia via Kozmino rose to 0.62 mb/d, with exports to China now firmly above 0.90 mb/d. India's Essar and BPCL are also receiving ESPO crude for the first time. The latest crude export forecast is based on a higher estimate of crude production.
While the energy ministry cautiously expected output would remain flat at last year’s level of 526.8 million mt, or rise by 3 million mt under its more optimistic scenario, the economy ministry envisaged liquids output to be 3.7 million mt above last year’s level. According to the economy ministry, crude and gas condensate production will be 530.5 million mt or 10.654 b/d on average in 2015 based on the trend in the first six months of the year. This would represent a 0.6% y-o-y increase.
Russia’s crude and condensate production has been growing steadily over the last few years, but various forecasts, including those from international organizations, envisage a drop in output this year. The forecasts are based on expectations that Russian oil producers are set to start cutting investment in drilling because of low oil prices and financial sanctions. Drilling rates jumped by around 20% in the first two months of the year, from a low 2014 base, but growth has slowed to 9% in 1H15. Russian crude production hit a new post-Soviet high of 10.7 million b/d in 2Q.
On a quarterly basis, Russia’s 2015 supply is expected to average 10.69 mb/d, 10.56 mb/d, 10.49 mb/d and 10.44, mb/d, respectively.