Russia is ending 2015 with a firm intention to continue producing oil full throttle in pursuit of its own market share strategy, and also to take advantage of the impending lifting of Western Sanctions on Iran. This as the government considers reevaluating the $50/bbl oil price assumption factored into its 2016 budget, which you can read about here.
Russia Produces Full Throttle
Russia’s oil production is on track to hit yet another post-Soviet record high this week of 10.86 M/bpd, the country’s Energy Ministry data show. Thus, Russia’s pursuit of market share is far from abating amid the global slump in oil prices.
In fact, throughout 2H15, officials have reiterated that the country plans not only to maintain this record output level, but boost it further. In a speech to the Eastern Economic Forum in September, Rosneft CEO Igor Sechin said Russia could boost oil production by a third to more than 14 M/bpd in the next 20 years. Hence, Russia will almost certainly not be the first to respond to the disingenuous refrain of other leading producers, “If you cut, we’ll cut.”
Rosneft CEO Igor Sechin
According to Bloomberg’s analysis of the Energy Ministry data, Russia’s oil and gas condensate output for December is set to average 10.783 M/bpd. This nearly matches the record set in November of 10.785 M/bpd.
A weaker ruble that’s cut O&G services costs, together with an industry-favorable tax regime, have facilitated Russia’s month-after-month record-setting oil production in 2H.
Bloomberg notes that the start up of the Yarudeyskoye field at the beginning of the month meaningfully contributed to the boost in production. The Novatek-led venture said that production from the field will quickly rise to 70,000 bpd. “The field’s high quality reserve base and the application of state of the art drilling and completion technologies enabled us to ensure record high flow rates as well as very low per unit development and lifting costs,” Leonid V. Mikhelson, Chairman of Novatek’s Board, said on December 1.
Russia-Iran Oil Rig Deal
In addition to this news, Russian and Iranian shipbuilding companies have reportedly signed a deal for the building of oil rigs in the Persian Gulf, Iran’s PressTV reports.
Hamid Rezaian, Managing Director of Iranian shipbuilder ISOICO, told RT.com that the deal will see Russian Krasnye Barrikady (Red Barricades) shipyard contract rigs for oil and gas E&P activities. The Russian firm will also reportedly share some of the technology.
Hamid Rezaian, Managing Director of Iranian shipbuilder ISOICO
“We are ready to provide ISOICO with the necessary equipment thanks to the financial and insurance support of the Russian government,” Alexander Ilyichev, CEO of Krasnye Barrikady, was quoted as saying. He also said that the Islamic Republic expressed interest in ordering new oil tankers for use in the Caspian Sea.
The agreement was signed in Iran earlier this month. RT.com reports that ISOICO’s Rezaian said last month that the company was awaiting the rescinding of Western sanctions from Iran early next year.
The company plans to announce a series of joint projects with major global shipbuilders, RT.com reports, including those of Italy, Germany, China, South Korea and Turkmenistan.