Page 78 - RusRPTSept20

9.0 Industry & Sectors 9.1 Sector news
9.1.1a Oil & gas sector results
Russian crude oil and gas condensate production rose to 39.6 mln tonnes in July from 38.2 mln tonnes in June (a 0.5% m-o-m increase in average daily output), Interfax has reported, citing CDU TEK data.
Average daily crude oil and gas condensate output increased 4.7% to 1.338 mln tonnes over August 1-2 versus 1.278 mln tonnes in July.
Total Russian average daily liquids production grew 0.5% m-o-m to 9.37 mln bpd in July, as the deep OPEC+ production cuts had been extended by one month from May through July versus the original May-June plan. It seems the major Russian oil and gas companies started preparing for the production cuts to ease in August. Based on preliminary rough estimates, Rosneft increased daily liquids production 0.4% m-o-m in July, Lukoil 1.5% and Gazprom Neft 2.0%, the increases coming mainly at the expense of other producers.
Despite the moderately positive overall performance from Russian oil majors, Slavneft (a Rosneft/Gazprom Neft JV) and Bashneft seemed to bear the additional burden. According to Interfax/CDU TEK data, Slavneft's July crude oil output fell 25% m-o-m (down 48 kbpd) and 48% versus 1Q20, while Bashneft's production shrank 30% m-o-m (down 74 kbpd) and 54% versus 1Q20. Such a weak operating performance spells significant risks for Bashneft minorities, as at least the near-term dividend flow is likely to be affected.
According to the OPEC+ deal terms, Russian total oil production is supposed to increase by around 0.5 mln bpd this month. Based on Interfax data for August 1-2, liquids output has risen 440 kbpd versus the July average (up 450 kbpd from the May-June production level), to 9.81 mln bpd, a level roughly in line with the OPEC+ deal.
Russian daily oil and condensate production has risen to 1,338kt/d (9.8mmbbl/d) in the first days of August, up 59.5kt/d (around 440kbbl/d), or 4.7%, compared with July, Interfax reported on August 5.
The state-owned oil giants Rosneft and Gazprom Neft have increased production 7% in August vs. July, while the privately owned companies Lukoil, Surgutneftegaz (Surgut) and Tatneft have increased daily liquids output 4%, 6% and 6%, respectively.
“The OPEC+ deal envisaged Russian crude production growing some 400kbbl/d from August, as the overall OPEC+ quota increased 2mmbbl/d. Although the figures for condensate production (which is not part of the OPEC+ deal) have not been disclosed so far, given that gas production is likely to remain flat m/m, we estimate that crude oil production grew 440kbbl/d, or 5% m/m. Thus, the increase in crude output by Russian Oils is broadly in line with the OPEC+ deal terms. We note that all public companies were able to increase crude production in August. Still, for FY20F we estimate that total Russian crude production is to fall 8.7% y/y,” VTB Capital (VTBC) said in a note.
78 RUSSIA Country Report September 2020 www.intellinews.com