Page 4 - FSUOGM Week 33 2019

FSUOGM COMMENTARY FSUOGM
Rosneft output slumps on OPEC+
deal, other pressures
One of Rosneft’s traditional problems has been achieving organic growth
RUSSIA
WHAT:
Rosneft suffered a dip in output in the second quarter.
WHY:
The company blamed the decline on OPEC+ restrictions and the dirty oil crisis.
WHAT NEXT:
Rosneft is falling behind its domestic competitors in several crucial areas.
RUSSIA’S largest oil producer Rosne endured a difficult second quarter, with output down 3.3% on the previous three months as a result of OPEC+ cuts and fallout from the Druzhba dirty oil crisis.
Hydrocarbon production in April through June averaged 5.71mn barrels of oil equivalent day (boepd), the company reported on August 20, down from 5.9mn boepd in January through March. Figures for the rst half of the year also disappointed, with overall output up only 1.8%, suggesting Rosne is on track for another year of weak growth (production was up only 1.3% in 2018).
Rosne attributed the latest slump in part to restrictions under the OPEC+ accord between Russia and other leading oil producers, aimed at propping up oil prices. Rosneft’s powerful head Igor Sechin has vehemently opposed the
production pact, viewing it as a strategic threat that largely bene ts the US rather than Russia.
Rosne also had to scale back production at Western Siberian elds in the second quarter a er millions of barrels of oil in Russia’s main Druzhba export pipeline were contaminated. e crisis forced state pipeline operator Trans- ne to temporarily restrict oil intake from some of Rosne ’s Western Siberian elds. e long- standing feud between the two companies over oil tari s has not helped matters.
While these are largely factors beyond Ros- ne ’s control, the company’s performance was weaker than that of its domestic competitors.
Falling behind
Privately-owned Lukoil, Russia’s second biggest oil producer, boosted hydrocarbon extraction by 2.8% y/y in the rst half, largely
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w w w . N E W S B A S E . c o m Week 33 21•August•2019