Russia continues to set oil production records waiting for 'oil freeze'
Russia's average daily production of oil and condensate in October increased by 3.9% on the year and by 1% on the month to 11.204 million barrels, setting a new post-Soviet record high (the previous was 11.11 million bpd), news agencies reported, citing data of CDU TEK, an agency that provides data and analysis to the Russian Energy Ministry
Combined October oil production reached 47.386 million tonnes, RIA Novosti reports. The combined exports reached 23.474 million tonnes in the month.
The oil industry in Russia continually has set records on daily production already since the end of 2015, a leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, told Vestnik Kavkaza.
The expert explained that this is due to investments, which were made when the oil price was high. "The investment cycle in the oil industry is quite long. When 5-7 years ago, oil was expensive, large investments were made to gain excess profits in the future. Now projects are coming into industrial capacity and give additional oil," he said.
A leading analyst of the National Energy Security Fund said that, naturally, the question arises given the above data, how would it be possible to correlate output records with 'freeze' agreements? Actually, all the countries are going to produce as much as possible in the run-up to 'freeze' talks. The fact is that the date when a 'freeze' will be made has not yet been agreed. For Russia it is beneficial to freeze anytime, because we continually has set new records in both September and October," Yushkov said.
However, individual companies will suffer damage anyway, he added. "They have invested money hoping that they will produce more and more oil," the expert warned.
"Moreover, it is unclear how a 'freeze' burden will be distributed between the companies. Russia has a liberal model of the oil market, unlike the OPEC countries, which, as a rule, have one big state-owned company. Our Ministry of Energy can give instructions only to the companies' management," Igor Yushkov concluded.
A senior analyst of 'Uralsib Capital', Alexei Kokin, also explained that Russia's oil production sets records not because of its desire to increase output. "This is the result of a number of long-term investment projects, which should lead to the beginning of production in a number of fields in the second half of the year, including the Messoyahskaya Deposits Group of Gazprom and Rosneft, the Pyakyakhinskoye field of Lukoil, a number of Rosneft's large deposits and so on," he noted.
However, according to the expert, Russia has already expected in the beginning of the year such a large increase in production by the end of the year. "Perhaps it will continue in November: the Filanovsky field will come into industrial capacity soon, the Suzunskoe field is being developed. But this investment cycle has begun much earlier, in many cases in 2014," Alexei Kokin сoncluded.