Page 17 - FSUOGM Week 21

FSUOGM PERFORMANCE FSUOGM
Russneft says it complies with OPEC+ cuts
RUSSIA
Russneft says it met its quota in mid-May.
RUSSIAN mid-sized oil producer RussNeft announced on May 21 it had reached compliance with OPEC+ cuts in mid-May, without disclos- ing its current level of production.
The company said it had shut down a num- ber of wells at its fields in Siberia and the Volga region to rein in supply quickly. It chose wells to slow based on their economic efficiency and technical capabilities, it said.
Under the new OPEC+ pact, Russia has to maintain oil production in May and June at under 8.5mn barrels per day, versus an output of 10.5mn bpd in February. The restrictions do not apply to condensate flows, which rise and fall with gas output. The cuts are being imposed on producers on a pro-rata basis.
RussNeft, part of the Safmar group owned by Russian businessman Mikhail Gutseriev,
produced 7.12mn tonnes (143,000 bpd) of oil last year, more or less the same amount as in 2018. Before the previous OPEC+ deal expired at the start of April, RussNeft claimed it would be able to boost output to 180,000 bpd if there were no restrictions.
Russia’s OPEC+ commitments will require producers to make their deepest ever cuts to sup- ply, and there are concerns that some wells and fields that are shut down will be too expensive to restore once quotas end.
Tatneft, which ranks as Russia’s fifth big- gest producer with an output of 592,000 bpd, warned in late April it would have to mothball around 40% of its wells. Both RussNeft and Tat- neft operate mainly mature oilfields, some of which have comparatively high operating costs for Russia.™
Russian gas demand slides 10% in Q1
RUSSIA
Consumption could fall further in the second quarter.
RUSSIAN gas demand was down 10% year on year in the first quarter, weighed down by unu- sually warm weather and the impact of corona- virus (COVID-19) restrictions, Russian Energy Minister Alexander Novak reported on May 25.
Based on previous data, this would imply that consumption totalled just above 90bn cubic metres in the three months ending March 31. Demand for gas in power generation and heating fell by 11% and 13% respectively, while house- hold gas consumption dropped 9%.
“Although the reduction in domestic gas demand does not comes as a surprise, given the warm weather and COVID-19-related lim- itations, we believe the risks will be dispropor- tionally spread between domestic gas suppliers, as has historically been the case,” VTB Capital (VBTC) said in a research note on May 26.
Gazprom previously projected a 9% year-on- year decline in domestic gas supplies, but Novatek
reported a much smaller drop of only 3%.
Russia began imposing COVID-19 lockdowns in Moscow and other major cities at the end of March, suggesting demand will slide further in the second quarter. Gazprom has said it expects full-
year Russian gas sales to decrease by 5%.
Coal supplies to the Russian market were also down 9.4%, while the country’s exports fell 9.1%, mostly on weaker sales to Europe, Novak said. As
a result, production also dipped 11.1%.
Novak also commented on the global oil mar- ket, noting that demand had picked up by 20% in May compared to April. But while 14-15mn barrels per day (bpd) of supply has already been taken offline, in large part thanks to OPEC+ cuts, he warned that there was still a surplus of around
7-12mn bpd.
The ministry expects the market to rebalance
in June or July thanks to higher consumption, he said. ™
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