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Russian oil and gas in 2017: the overview

Russia’s oil and gas industry has dug its heels in and weathered a bombardment of issues over the last 12 months. Low commodity prices, domestic economic downturns and production cuts have all done little to knock the wind out of Russia’s energy sails – and the mood in Moscow is cautiously optimistic.

Russia’s oil and gas sector: a vital industry for a major player

Russia accounted for 5.1% of total worldwide energy consumption in 2016. Oil and gas courses through the nation’s veins – responsible for over 40% of its total federal budget revenues – making the sector’s continued development essential for maintaining Russian economic health.

All told, Russia sits on major resource deposits, home to the world’s sixth largest recoverable oil reserves (6.4% of totals), and the second biggest bank of natural gas reserves anywhere on the planet (17.3% of totals).

2017 so far has been a good year for Russian oil and natural gas, coming off the back of an active, fruitful 2016, as major projects continue to roll along at a brisk pace.

During this period, oil production rose – something it has been doing for eight consecutive years - and natural gas also enjoyed a production increase too.

Russian oil and gas production grew last year


From deep within the heart of the Urals-Volga, North Caucasus and Siberian oil fields, greater volumes of crude and associated products are being extracted by Russia’s oil players. Their activities helped Russia to bump up production output by 2.2% in 2016. According to BP, this means Russia accounts for 12.2% of global output. 
Russian oil producers reached new post-Soviet production highs in 2016, topping off at a record breaking 11.2 million bpd. 

Natural gas companies also grew their respective output levels by 0.6%. Not quite as hefty as oil’s increases, sure, but in the Far East of Russia, gas exploration and extraction is gaining speed. And, with China agreeing to buy $400 billion worth of LNG from Gazprom over 30 years in 2014, expect to see this figure float steadily upwards well into the next century.


OPEC cuts to hit Russian oil output

The OPEC-led oil production cuts, part of the global strategy to reinvigorate the industry after two years of low oil prices, is affecting Russian output too. In order to meet its targets, Russia has dropped production by 300,000 bpd, fulfilling its part of an output-cutting agreement with Saudi Arabia and other OPEC states.

Russia reached this goal by the end of April 2017. Now, it is determined with Saudi Arabia to keep the production cut running until at least March 2018, rather than its year-end 2017 date. There is still a glut of oil stockpiles worldwide, contributing to price instability and creating uncertainty for Russia.

Lukoil has slowed activities at some of its production sites in Russia’s Siberian oil heartland, with other sites following suit. Russia is keen to redress the worldwide oil supplies balance, however, but it appears a little tense about deeper production cuts. When asked by CNBC if Russia was mulling this over, Energy Minister Alexander Novak said he believes that “the ceilings and figures we have reached are sufficient to continue to rebalance the market.”

All eyes turn to Russia’s Far East

As you can see from our Project Map of Russian oil and gas developments, the Urals, Baltic and Arctic areas of Russia are home to lots of upcoming and ongoing projects. To the east of these are some of Russia’s biggest oil and gas projects – such as the $12.7 billion Amur LNG plant and the $20 billion, 3,000km Power of Siberia pipeline.

The Russian Far East boasts over 52.5 trillion cubic metres of onshore gas, alongside 14.9 trillion cubic metres of offshore alone. Gazprom is leading the charge when it comes to development of the Far East, with fingers and funding in huge development sites.

In short, the future of Russia’s energy industry could lie in the East. Greater Russo-Chinese cooperation in the energy field too, including those massive supply deals, is likely to provide a big influx of cash and E&P activity in the region too – securing a lucrative tomorrow for the Russian oil and gas sector.

MIOGE 2017 will be playing host to the biggest players in Russia’s oil and gas industries, offering networking as business opportunities with the great and the good of the Russian energy sector.

Want to find out more about MIOGE 2017? Visit the website to get your free e-ticket and meet these and hundreds of other producers and companies.

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