Page 11 - FSUOGM Week 44 2019

FSUOGM PERFORMANCE FSUOGM
Russian oil output down in Oct, but still misses OPEC+ target
RUSSIA
The decline was led by Rosneft and Gazprom Neft.
RUSSIA oil production fell to 11.23mn barrels per day last month, from 11.25mn bpd in Sep- tember, although the country still fell short of its commitments under an OPEC-led deal on output cuts.
Under an agreement with OPEC and other major producers, Russia has pledged to keep its output 228,000 bpd below the level achieved in October last year of 11.42mn bpd, meaning a cap of around 11.19mn bpd.
Calculation of Russia’s production can vary depending on what ratio between tonnes and barrels is used. According to Russian Energy Minister Alexander Novak, the country cut out- put last month by 211,000 bpd from the October 2018 baseline. By the end of the month the cuts had reached 298,000 bpd, he said.
National oil company Rosneft slashed its output by 0.9% last month, while smaller state- owned firm Gazprom Neft reduced extraction by 2.6%. Russia’s other major producers Lukoil, Surgutneftegas, Tatneft and Bashneft produced around the same volume as in September, while
smaller non-integrated firms boosted output by 1.3%.
Gazprom Neft, which has achieved the fast- est rate of production growth among Russia’s top oil companies in recent years, has been reducing output for three months in a row. In previous months, this was largely owing to maintenance at the Prirazlomnoye oilfield, Russia’s only offshore Arctic project in opera- tion, VTB Capital wrote in a research note. In October it suffered from decline at its mature assets in Western Siberia.
Russia’s compliance with the so-called OPEC+ deal has been mixed this year. It grad- ually lowered its output during the first quarter to reach the target and then exceeded it between May and July because of supply disruptions caused by the Druzhba dirty oil crisis. Russia then began ramping up output again to compen- sate for previous export restrictions.
Russian oil exports reached 22.6mn tonnes (5.34mn bpd) in October, up 3.4% y/y but down 8.2% month on month.™
POLICY
Naftogaz files fresh claims against Russia
UKRAINE
Naftogaz is frustrated with Gazprom’s refusal to pay a previous Stockholm award.
UKRAINIAN gas firm Naftogaz has filed new legal claims against Russia’s Gazprom with the Arbitration Institute of the Stockholm Chamber of Commerce, because “effectively Gazprom wants the previous Stockholm arbitration decision on the transit contract to be reviewed,” according to Naf- togaz Executive Officer Yuriy Vitrenko.
“The number of pages in our Statement’s core text alone exceeds 500 pages. Attached thereto are three international expert reports designed specifically for that. Also enclosed are witness testimonies and a host of other appendices,” Vitrenko wrote on his official Facebook page on November 2. “I will write in more detail about our claims and also why Gazprom’s claims are unsubstantiated a while later.”
On October 30, Russian President Vladimir Putin called for Gazprom and Naftogaz Ukrainy to drop their legal claims relating to the settle- ment of a debt problem and the signing of gas transit and delivery contracts.
“This absurd should be ditched and all claims nullified on all sides,” news agency Interfax quoted Putin as saying in Hungary. “We are prepared for constructive work, both on gas pumping through Ukraine and on gas supplies to Ukraine, and [we will do so] with a signifi- cant reduction of the price, different from the
one that Ukrainian consumers of the Russian gas have today.” “And that this gas is Russian is no doubt. There are no reverse [flows] there. But never mind, this false reverse. The main thing is that there are obvious benefits for Ukraine and for the end consumer: for utilities, for citizens, and for the economy as a whole,” Putin said.
In a phone call with German Chancellor Angela Merkel last week Putin floated the idea of linking the settlement of the arbitration claim of $3bn by Naftogaz on Gazprom with a new gas transit deal. As the Nord Stream 2 construction has been delayed by Denmark’s reluctance to grant construction permits, which the govern- ment only granted last week, until around May Russia needs to sign off on a temporary transit deal to send gas via Ukraine for the second part of the winter after the transit deal expires on January 1, 2020. However, Russia is seeking to wriggle out of paying the entire $3bn by appar- ently trading some of the payment in exchange for improved terms on a transit deal.
Kyiv is reluctant to negotiate, but faces the prospect of being cut off entire on New Years day as both Naftogaz and Gazprom have been building up gas reserves and can probably mud- dle through the second half of winter without any gas transits via Ukraine. ™
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