A draft document from the Russian Energy Ministry has been the subject of considerable comment in recent days with strong suggestions that Russian crude oil output could have peaked in 2019.
The document contains base-case projections showing oil output falling to 10.71m barrels per day in 2021 from 11.25m barrels per day in 2019.
Russian producers extracted 43.34m tons of crude oil and condensate in March 2021, according to preliminary data from the Energy Ministry’s CDU-TEK unit. That equates to 10.249m barrels a day, based on 7.33 barrel-per-ton conversion ratio – an increase of 1.3% on the previous month.
The energy ministry document also noted that Russia’s output capacity is primarily determined by fiscal conditions rather than macroeconomic conditions. If the high taxation levels on Russia’s oil industry are reduced this may lead to output recovering and exceeding 2019 levels. To maintain and increase recovery rates from Russian oilfields significant capex will be required over the coming decade.
The economic effects of the Covid-19 restrictions caused a significant decline in Russian exports in 2020/21. Russia and the OPEC+ exporting countries agreed a reduction in export quotas to address the oversupply of crude oil and falling prices. However, quota relaxations are now anticipated throughout 2021/22 as global demand recovers.
Statistics released by Russia’s Federal Marine and River Transport Agency (Rosmorrechflot) reflected these changes. It reported that in January-March 2021, the country’s seaports had handled 198.11m tonnes of cargo, down 4.5% on the same period in 2020. This decrease was mainly attributed to a 13.6% decline in liquid bulk cargo handling, down to 102.78m tonnes.
However, a range of other factors could affect the crude oil supply and demand scenarios up to 2035.
Russian energy planners see challenges to its oil industry from the decarbonisation of the economies in its main export markets. A decline in liquid transport fuels during this decade, such as the market for diesel fuel, could lead to a rapid and permanent loss of demand in Europe and other regions.
Climate change is now viewed as a serious challenge for Russia, with the economy and state revenues heavily reliant on oil and gas production, as well as from mining. The government is coming under increasing pressure to cut emissions. However, a projected increase in LNG exports could go some way towards offsetting any loss of crude oil revenues.