Press Release: Clock Ticking for Russian Compliance with OPEC Deal

Growing spare productive capacity at Rosneft and Gazprom will soon lead to weakening Russian compliance with the OPEC+ production cap, according to ESAI Energy’s newly published CIS Watch Crude Outlook. In April, Russia produced 10.9 million b/d, or 260,000 b/d less than in October 2016. By comparison, Russia agreed to cut output by 300,000 b/d compared to that level. ESAI Energy projects Russian production will increase by 120,000 b/d from 2018 to 2019 even as the OPEC+ deal holds.

The report details progress at Rosneft and Gazprom Neft’s new field developments. As the report describes, for each new barrel of production Russian oil companies add they must cut an equal amount elsewhere to remain in compliance. Now that Urals export netbacks are back in the low $50s and spare productive capacity is expanding, Russian producers are eager to raise output and generate profits. To demonstrate the widening gap between Rosneft and Gazprom Neft’s productive capacity, the report provides updates of progress and near-term production targets for the Vankor cluster, Yurubcheno-Tokhomskoe, Kuyumba, Messoyakha, Novoportovskoe, Prirazlomne, Taas-Yurlakh, and the Vankor cluster.

“Recent production increases are evidence many new projects are moving forward,” comments ESAI Energy Principal Andrew Reed. “The longer the OPEC+ deal remains in place, the more likely state-owned oil companies like Gazprom Neft will test the Kremlin’s resolve for compliance by allowing production to creep higher. Six months from now, Russia may follow Kazakhstan’s example, restraining output at some fields to demonstrate ‘good intentions’ even as overall production climbs.


Ben Roberts
ESAI Energy, LLC


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