Analysis-Russia seen missing its May target for pre-pandemic oil output

Analysis-Russia seen missing its May target for pre-pandemic oil output
Analysis-Russia seen missing its May target for pre-pandemic oil output   -   Copyright  Thomson Reuters 2021   -  
By Reuters

<div> <p>By Olesya Astakhova</p> <p><span class="caps">MOSCOW</span> – Russia is unlikely to hit its May target of pre-pandemic oil output levels due to a lack of spare production capacity but could do so later in the year, analysts and company sources said on Tuesday.</p> <p>Deputy Prime Minister Alexander Novak, in charge of Moscow’s ties with the <span class="caps">OPEC</span>+ group of oil producers, has said output by May is expected to hit pre-pandemic levels, or about 11.33 million barrels per day (bpd) of oil and gas condensate, as seen in April 2020.</p> <p>However, many oil producers have reported they are almost out of spare production capacity having reduced output in tandem with other <span class="caps">OPEC</span>+ producers.</p> <p>Part of the problem is old wells, mostly in Siberia, that are struggling to increase output, industry sources say.</p> <p>Production of oil and gas condensate in December stayed at around 10.9 million bpd, in line with November, despite Russia’s <span class="caps">OPEC</span>+ quota rising by 100,000 bpd.</p> <p>“It’s possible that Russia will be behind the output increase schedule in the first half of 2022 and not reach its pre-crisis level until the end of summer,” said Dmitry Marinchenko of Fitch Ratings.</p> <p>Marinchenko said it would be hard for Russian companies to increase monthly output by 100,000 bpd and that they would need to intensify drilling.</p> <p>“That would take some time,” he said.</p> <p>A source at one Russian oil major said efforts to boost oil production have also been hampered by a lack of new wells at oilfields with high levels of water, as well as declining oil well production rates at hard-to-recover fields.</p> <p>He said Russia would not likely hit pre-pandemic output levels before August.</p> <p>Alexei Kokin of Otkritie brokerage had a similar view: “Russia is unlikely to reach the pre-crisis output in April. According to the plans of <span class="caps">OPEC</span>+, this should happen by September.”</p> <p>Until 2017, Russia never cut production in tandem with <span class="caps">OPEC</span> producers. But last year its cuts amounted to almost a fifth of its capacity, or 2 million barrels per day (bpd) amid a global demand collapse caused by the pandemic. </p> <p><span class="caps">OPEC</span>+ is easing its output curbs, however, and in early December agreed to stick to its plan to increase output in January by 400,000 bpd.</p> <p/> </div>