Brownfield sites curb Russian growth
Producers profit from post-devaluation oil pricesbut oil fields are depleting
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As we had predicted in the last year's article, oil production in Russia continued to grow in 2018. According to the Russian Ministry of Energy, in 2017 oil output totalled 11mn bl/d, in accordance with the Opec agreement when Russia had to cut production by 300,000 bl/d. In the ten months of 2018 so far, output grew on average to 11.1mn bl/d. In October production exceeded the previous historic maximum of 11.4mn bl/d recorded in October 2016, just prior to the Opec deal.
Production growth in 2018 was driven by the June decision of Opec to increase production to offset output losses in Venezuela, Iran, Mexico and Angola. That prompted Russia to accelerate the launch of new projects and the development of the existing ones. In the period from June to October 2018 alone, oil output rose by 400,000 bl/d, according to the Ministry of Energy data. That is, oil production did not just reach pre-Opec deal levels, but exceeded them. The breakthrough was prompted by unprecedented oil prices measured in roubles following devaluation, making production extremely profitable for Russian companies.
Even those oil deposits, which two years ago seemed economically unviable, are becoming attractive given the current pricing environment. In 2019 we....