Russia's 2013 Oil Output Hits Post-Soviet High

Posted: Thursday, January 2, 2014

World energy power Russia said on Thursday that its oil output hit a post-Soviet high in 2013 while natural gas production at its vast Gazprom OAO (OGZPY) holding slipped for the second straight year.

The mixed figures--highlighted by yet another dip in oil exports outside ex-Soviet territories--point to lingering problems in a sector that accounts for about half of Russia's budget revenues.

It also remains instrumental to President Vladimir Putin as he battles a rapid economic slowdown that has put a strain on the commitment to broader social spending he made when re-elected to a third term in 2012.

The Russian energy ministry's reporting unit said oil and gas condensate production grew by 1.0% last year to reach a new record of 523.3 million metric (10.51 million barrels per day).

Analysts and Russian media reports attributed the jump to soaring output by state-owned Rosneft (ROSN.RS) --the world's largest publicly traded oil firm--at the mammoth Vankor field it launched in Siberia in 2009.

Gazprom is also ramping up production of gas condensate as its seeks to diversify away from its traditional but stalling pipeline supplies of blue fuel to Europe.

Russia had established its previous oil output high in 2012 when it reached 10.40 million barrels a day.

Its post-Soviet low came in 1994 when daily output slumped to 6.0 million barrels--less than half of the 12.4 million barrels Russia and 14 other republics produced as part of the Soviet Union in 1988.

The current rate outpaces Saudi Arabian output and clinches for Russia the title of the world's biggest oil producer.

But Russia lacks the quick ability of Saudi Arabia to boost output in case of a strong global economic rebound or more serious turmoil in the Middle East.

It also appears to be unable to break through any further on large foreign markets to which it has no direct pipeline and that in some cases are starting to depend on U.S. shale oil.

Thursday's figures showed Russia's exports outside the former Soviet nations declining by 2.2%.

Russia's overall natural gas production rose last year amid stiffer competition for state-owned Gazpom from privately owned firms such as Novatek (NVTK.LN) and Lukoil (LUKOY).

Total natural gas output rose by 2.1% to 668.0 billion cubic meters (23.6 trillion cubic feet).

Gazprom's production was reported at 476.1 bcm--down from 478.8 bcm in 2012 and well off 2011 output of 513.1 bcm.

The drop reflects the reality that almost all of Gazprom's foreign sales are focused on European and post-Soviet countries now experiencing some of the slowest growth rates in the world.

Gazprom has also been slow to shift its focus to liquefied natural gas production that could help it reach the growing markets of Asia and Latin America.

Russia's shale supplies are only now being probed in detail and estimates vary over how much oil and natural gas they might hold.

(DowJones)