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Ahead of promised cut, Russia's oil output hits record high

Published 02/12/2016, 14:37
Updated 02/12/2016, 14:40
© Reuters. Worker checks valve of oil pipe at oil field owned by Bashneft company near Nikolo-Berezovka
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By Katya Golubkova

MOSCOW (Reuters) - Russia plans to use its November oil production, which was its highest in almost 30 years, as its baseline when it cuts output under this week's deal with OPEC, Deputy Energy Minister Kirill Molodtsov said on Friday.

Russia has promised to gradually cut output by up to 300,000 barrels per day (bpd) in the first half of 2017 as part of a deal with other producers aimed at supporting oil prices.

Its daily oil production rose to an average of 11.21 million bpd in November, Russia's highest since the Soviet era, energy ministry data showed on Friday.

That was 500,000 bpd higher than in August, the month before Russia and OPEC reached a preliminary agreement in Algiers to cap production.

Under this week's follow-up agreement, the first between OPEC and Russia since 2001, specific cuts for individual states were set, with almost all OPEC members agreeing to cut from October levels.

But Russia will use its November-December output levels, Energy Minister Alexander Novak told reporters on Thursday. November's production rose only slightly from October, by just 10,000 bpd, ministry data showed.

"The peak of daily production for November was 11.231 million barrels," Deputy Energy Minister Molodtsov told a conference in Moscow.

"All our agreements will clearly be formed around this figure," he said. According to his presentation, Russian production could grow to 11.3 million bpd in December.

NEW FIELDS

Lukoil and Surgutneftegas raised output in November while production slipped at fields operated by Rosneft, Gazprom (MCX:GAZP) Neft and their joint venture Slavneft, preliminary data showed.

"The most important thing is that we had growth plans for another 200,000 bpd (in Russia in total) above the current level, so practically, 0.5 million bpd will not reach the market," Lukoil vice-president Leonid Fedun told reporters.

Rosneft, Gazprom Neft and Lukoil have all launched new fields this year and increased drilling, despite low oil prices.

Novak has said that all companies will join the cut. Details should be finalised close to the end of the next week for a meeting between OPEC and non-OPEC nations, which may happen in Moscow on Dec. 10.

Fedun said that cuts from Russia are likely only from the second quarter of the next year because it needs time to lower output - technically challenging due to severe weather.

"There are low-marginal wells which will be stopped during this agreement," Fedun said when asked how Lukoil is going to contribute.

"A year is enough for the market to rebalance... The balance will be reached - and (we) could restart again."

© Reuters. Worker checks valve of oil pipe at oil field owned by Bashneft company near Nikolo-Berezovka

Novak also said Azerbaijan, Kazakhstan, Mexico, Oman, Bahrain and other non-OPEC producers could join the deal and he expected them to jointly match Russia's cut of 300,000 bpd.

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