Russia increased its oil and gas condensate production in August as global output curbs eased, indicating it can restore its fields quickly even without an earlier announced plan to drill new wells, data showed and sources said.
Russia, among the world’s top three oil nations with Saudi Arabia and the United States, is limited in how much it can pump by the deal between the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+.
Last month, Moscow produced 41.7 million tonnes of oil and gas condensate, or 9.86 million barrels per day (bpd), a 5% rise from July, Interfax reported, citing energy ministry data.
The increase followed a decision by OPEC+ to ease curbs on output to 7.7 million bpd from 9.7 million bpd.
The deal excludes condensate, a type of light oil, some 700,000-800,000 bpd of which Russia pumps on average. Moscow’s quota is now 9 million bpd of oil so the latest data suggests Russia slightly overproduced last month.
Since joining the pact in 2016, Moscow has shown to be able to adjust output quickly despite harsh weather conditions and remote locations. It delivered its deepest-ever cut of nearly 2 million bpd in just two weeks this April.
Rosneft, Russia’s top producer, is lowering output mainly at its best fields and is examining which mature ones could be shut permanently, while closest peer Lukoil has targeted assets where output was already declining.
Rosneft added back 235,000 bpd last month from July and Lukoil another 60,000 bpd, their executives have said.
This year, Russia floated an idea to drill but unfinish nearly 3,000 wells, to restore oil output quickly once OPEC+ cuts expire in April 2022.
But as oil prices rise to nearly $46 per barrel from 20-year lows below $16 this spring and the state budget is tight, the idea has stalled, five sources familiar with the process said.
The drilling plan, worth as much as 400 billion roubles ($5.41 billion), involved bank loans, tax breaks and preferential interest rates, something the finance ministry is reluctant to approve as it is already setting aside additional funds to fight the coronavirus fallout, they said.
Companies have also indicated the new costly wells program may not be needed.
“Our experience with the previous OPEC+ deal and results of the last two months prove that stopped wells could be returned back to operation quickly without losing their productivity,” Pavel Zhdanov, vice-president with Lukoil, said last week.
The finance and energy ministries did not reply to requests for comment.
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