Monday, July 25, 2016

Goldman Sachs On Russian Oil Production

From BloombergGadfly:

Goldman's Hopeful Oil Call
International oil companies aren't spending enough on the extra capacity needed to meet demand by the end of the decade. So it will fall to countries like Russia to provide the additional production on which we will all depend.

Can Russia do it?

In a July 19 report, Goldman Sachs analysts painted a hopeful picture for Russian oil production -- putting the bank at odds with the forecast made earlier this year by the International Energy Agency. The latter, though, is more likely to be correct.

Divergent Views
Goldman Sachs and the IEA have very different views on the future of Russian oil production
Goldman expects growth in Russian production to accelerate, with output hitting 11.7 million barrels a day by 2018, an increase of almost 600,000 barrels a day from 2015. By contrast, the IEA expects output to fall by 160,000 barrels a day over the same period.
Rosneft accounts for more than a third of Russia's output, so the oil giant's performance over the coming years will be a big driver of what happens in Russia as a whole.
Worryingly, the company's output has been steadily declining ever since it acquired TNK-BP in 2013. Production has fallen by 120,000 barrels a day, or 3 percent, since then.

Rosneft in Retreat
Rosneft's production has fallen by 120,000 barrels a day, or 3%. since December 2013
More than half of the decline has come at Yuganskneftegaz, the oil production business it acquired from Yukos. Output there declined 5 percent in the period.

Two of Rosneft's other key legacy assets are also in decline: Samotlor, once Russia's most prolific field, is pumping just 400,000 barrels a day -- 14 percent less than in 2013. Orenburgneft's production also fell to less than 1.2 million barrels a day last month.

Even projects that had been helping Rosneft's output to increase are beginning to falter. Look at production from the Vankor field, which has slipped 5 percent from its peak of about 445,000 barrels a day....MORE