Page 7 - FSUOGM Week 06 2022

FSUOGM COMMENTARY FSUOGM

Russian gas output at five-year high

Oil production was meanwhile at a four-year low

RUSSIA THE output of Russian gas was at its highest level Gazprom cited the increased gas demand for
in the last five years, while oil production was at gas in Russia as driving up production, which
a four-year low, CDU TEK reported at the start was the key driver for the growth. In export,
of February. Gazprom delivered about 10.5 bcm to Europe,
Russia’s gas output was up 1.1% year on year down 43% y/y (but still slightly higher than the
in January at 69.4 bcm, after output grew at historical record low of January 2009), according
almost all the main gas producing companies. to VTBC.
Gazprom increased production 1% y/y to “The company continued to fulfil its contract
47.4 bcm. Novatek’s standalone production obligations to European customers, and is likely
slightly decreased 0.7% y/y. Yamal LNG’s gas to increase deliveries later this year as the major-
production grew 8.1% y/y, Terneftegas’s 5.9% y/y ity of contracts are take-or-pay and have limited
and Arcticgas’s 0.2% y/y, while Nortgas showed a flexibility in terms of gas delivery fluctuations
decline of 11.9% y/y. Novatek’s consolidated pro- over certain time periods (e.g. a quarter), as we
duction was down 2.3% y/y. Rosneft’s gas pro- have already seen from the growing gas exports
duction increased 7.1% y/y. At Surgutneftegas, in the first two days of February,” VTBC said.
production fell 2.8% y/y, while at Lukoil it was CDU TEK also published Russia’s oil and
down 4.0% y/y, according to CDU TEK’s figures. gas production statistics for January 2022. Rus-
“In January, OPEC+ production grew an sian liquids production was up 0.9% month
additional 400,000 barrels per day monthly, on month to 46.5mn tonnes in absolute terms.
while Russia’s quota increased [by] 100,000 bpd In daily terms, it also increased 0.9% m/m to
monthly. The data on the production of gas con- 10.96mn bpd.
densate in January in the country is not available Among integrated oil companies, Bashneft
yet. If we assume it at 111,500 tonnes per day showed the highest m/m growth in liquids daily
(December’s level), then the production of oil output of 8.7%, followed by Surgutneftegas,
in January could have been some 10.1mn bpd, with 2%. Rosneft increased daily production
which would be in line with Russia’s OPEC+ 0.5% m/m. Tatneft’s daily output was flat m/m.
quota of 10.1mn bpd,” VTB Capital (VTBC) Lukoil’s and Gazprom Neft’s daily production
said in a note. “However, we suppose that Rus- figures were down a slight 0.1% m/m and 0.3%
sian oil companies are unlikely to be able to reach m/m respectively. Non-integrated companies
their quotas in accordance with the increasing increased liquids production 1.1% m/m in daily
OPEC+ schedule and deliver production of terms to 3.03mn bpd.
10.4mn bpd of crude oil by May in the frame- On February 2, the participants of the OPEC+
work of their earlier articulated capex plans.” ministerial conference approved an increase in
VTBC estimates that crude production will oil production in March by the planned 400,000
only recover to the OPEC+ target by the end of bpd, according to the OPEC website.
the year (10.2mn bpd in 2022F on average, up As a result, Russian producers would increase
6% y/y), but that will have little effect on the com- oil production 100,000 bpd in March 2022,
panies’ valuations. according to Russian Deputy Prime Minister
Gazprom was producing at 1.57bn cubic Alexander Novak. However, by the end of Jan-
metres per day in January, which analysts say uary, OPEC+ participants were unable to pro-
is close to its maximum capacity, as the state- duce oil in line with their new quotas, as some
owned gas giant struggles to meet both domes- countries have been experiencing problems with
tic demand and also fulfil its export obligations. increasing production, reports VTBC.
As bne IntelliNews has reported, the V-shaped “This is in line with the existing schedule for
market of the last two years has pushed Russia’s raising OPEC+ production. We note that the
ability to produce gas close to the maximum baseline agreement envisages Russian crude oil
and without tapping the new fields in Yamal production growing 100,000 bpd every month
Russia’s ability to export more gas is limited. until April 2022. However, in our view, Russian
However, there is significant unused production oil companies are unlikely to be able to reach
and export potential from the Yamal fields, but their quotas in accordance with the increas-
without the new Nord Stream 2 pipeline in oper- ing OPEC+ schedule and deliver production
ation that gas cannot be exported and there only of 10.4mn bpd of crude oil by May under the
few interconnectors linking the Nord Stream guided capex plans. We estimate that crude pro-
2’s northern route to the central route that runs duction will only recover to the OPEC+ target
to western customers via Ukraine’s pipeline by the end of the year (10.2mn bpd in 2022F on
network. average, up 6% y/y),” VTBC said in a note. ™

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