Mother Russia - Recent Developments in Russian Crude and Refined Product Exports

Russia is a major producer — and exporter — of crude oil and natural gas, and a major exporter of refined products to boot. So it’s important to keep an eye on what’s going on in Russia, because as U.S. producers and refiners know all too well, what happens halfway around the world often has ripple effects in places like the Permian, the Houston Ship Channel and the Sabine Pass LNG terminal. Today, we discuss Russian crude production and refinery output, its compliance with the OPEC/NOPEC agreement to rein in crude production, and the country’s efforts to steer more of its crude and refined-products exports to Russian ports.  This blog is based on the latest FSU Monthly report from our friends at FGE – Facts Global Energy. 

Russia is the world’s largest producer of crude oil, its total liquids output averaging about 11.2 million barrels/day (MMb/d) — nearly 10.9 MMb/d of crude and 370 Mb/d of natural gas liquids (NGLs). That puts Russian crude production about 900 Mb/d higher than Saudi Arabia and 1.4 MMb/d more than the good old U.S. of A. Most important to U.S. producers, Russia is among the 11 non-OPEC (NOPEC) oil-producing countries that last December (2016) agreed to reduce their production by a total of 600 Mb/d from November 2016 levels starting in January 2017 for six months as part of a larger, OPEC-led effort to reduce world oil supply and prop up oil prices. As RBN covered in Is This The Real Life? Is This Just Fantasy?, half of that 600-Mb/d production cut (or 300 Mb/d) is supposed to come from Russia alone, and OPEC’s side of the OPEC/NOPEC bargain calls for OPEC members (except for Nigeria and Libya, who’ve been given a pass) to reduce their output by a total of 1.2 MMb/d, again starting in January 2017. The OPEC/NOPEC agreement was later extended — it is now scheduled to run through March 2018, and it may be extended beyond that. Bottom line: Russia is a big part of the production-cut equation.

This blog was written by FGE’s Dora Polgar.  FGE is a preeminent global oil and gas consultancy which provides leading independent research, analysis, consultation, and advisory services to a large and diverse client base across the world.  In 2015, FGE and RBN formed a strategic alliance to expand the client and consulting services of both companies.  FGE is based in London and operates offices in Singapore, Tokyo, Beijing, Dubai, Hawaii, and has satellite offices in California and Mumbai.  For more information about FGE’s products and services, click here.

Compliance with the agreement hasn’t been perfect (see Won’t Get Fooled Again), but it’s been pretty good. And Russia appears to be holding up its part of the deal — as we said, Russian liquids production in 2017 (solid orange line in Figure 1) has been averaging 11.2 MMb/d, or just below the 11.25-MMb/d target under the OPEC/NOPEC accord (green solid line). FGE also expects a 100-Mb/d month-over-month decline in crude production in September (2017) due to field maintenance at Sakhalin-I, a huge oil production project on Sakhalin, a large Russian island just north of Japan. (Sakhalin-I is largely owned by non-Russian companies, including ExxonMobil and Japan’s Sakhalin Oil & Gas Development, each with a 30% ownership share, and India’s ONGC Videsh, with a 20% stake.)

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