Russia Monitor is a review of the most important events related to Russian internal and external security, as well as its foreign policies.
Date: 30 May 2022 Author: Grzegorz Kuczyński
Oil Production in Russia Is Declining
Western sanctions against Russia have stricken the number top source of revenue to the federal budget. As more Western nations ban Russian oil, it is not enough for Russia to open up to new markets, including India’s, to maintain current output levels.
Russia’s oil production is expected to decline to 480-500 million tons this year from 524 million tons in 2021, according to official estimates. Crude oil production in Russia could shrink by up to 5–8 percent this year, Deputy Prime Minister Alexander Novak said, adding these estimates may vary depending on the market situation. The Russian economy ministry has said Russia’s oil output this year was set to fall 9.3 percent to 475.3 million tons in the base-case scenario and 17.2 percent to 433.8 million tons in the conservative one. Novak referred to the estimates, saying he was more optimistic about oil production in Russia. Russia had planned to expand its annual LNG output to 140 million tons by 2035 and it is sticking to the plan now, Novak added. When asked what projects can be discussed according to the instructions of the president and whether Arctic LNG-2 falls into this list, he clarified that he meant “those that are already being implemented.” According to Novak, all LNG refining projects will be supported, in particular the Amur Gas Chemical Complex and the Baltic Chemical Complex in Russia’s Ust-Luga. According to the International Energy Agency (IEA), Russia shut in nearly 1 million barrels per day (bpd) in April, driving down the world oil supply by 710,000 bpd to 98.1 million bpd. Russia’s total oil and condensate production fell by 960,000 bpd compared to March, to 10.4 million bpd, the lowest since November 2020. Oil production alone fell by 900,000 bpd to 9.1 million bpd. It is now seen by 1.3 million bpd below the OPEC+ target, the IEA report reads. “After being at a relatively stable level in March, Russian oil output fell in April. Refineries in the country were processing less oil due to a slowdown in exports of petroleum products and a decline in domestic demand caused by a wave of Western sanctions,” the IEA explains. “If this is confirmed, the average annual oil production will fall to 9.6 million barrels per day, such a level was last observed in 2004.” The only solution for Russia is to trade its oil outside Europe, notably in Asia.
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