Article / 05 July 2017 at 9:00 GMT

Russian oil output flattens, gas output soars

Russia oil and gas expert
United Kingdom
  • Russian oil production gains flattening out
  • Output still up almost 100,000 b/d from last year
  • Production capacity flexibility should be noted

 Russia is shifting its production focus from oil to gas. Photo: Shutterstock

By Nadia Kazakova

Russia's oil output is no longer making headlines as it flattens out at just below 11 million barrels of oil equivalent per day (boe/d). The official oil production data show that Russian oil companies pumped 10.946 million boe/d in June, almost unchanged on May. 

Compared with last year, the country's oil output is still up almost 100,000 barrels/day or 0.95% year-on-year.

Russian oil and gas liquids output and exports, million boe/d:

For oil bulls, there is a smidgen of hope in the export numbers for June as crude exports were down 0.14% y/y to 5.03 million boe/d. There has been also a large absolute (but seasonal) decline month-on-month as the Russian oil companies diverted more oil to refineries.

Russian crude oil production is now probably at around current capacity levels, close to the levels seen prior to the September 2016 surge. Exports might continue to decline in July-August 2017 following the seasonal pattern. This should be fully expected, but it still could be marginally positive for oil markets.

The more interesting statistics are those concerning Russian gas output and exports. Total gas production (natural gas and associated petroleum gas) shot up by around 18% in June to 51.3 billion cubic metres/month.

In the first six months of the year, gas production has been up 10.5% y/y to 342 billion cubic metres (12.58 million barrels of oil equivalent a day). 

Russian total gas output, billion cubic metres/month:
Source:, for June 2017 stats

Russian pipeline gas exports to Europe (including Turkey) were up 12.6% y/y in H1'17 to 95.6 billion cubic metres, according to Interfax estimates. 

Higher volumes of cheap Russian gas in Europe could have some effect on crude oil demand in the petrochemical sector, but the effect might prove marginal. 

The striking ability of the Russian gas sector to ramp up production capacity, however, should be noticed. Unlike the Russian oil sector, which operates its ageing fields under the motto “use-it-or-lose it”, the Russian gas industry evolved to meet fluctuations in seasonal demands and still enjoys the luxury of regulating output by simply turning on and off the taps at a handful of its super-giant fields.

Gazprom ADR price, USD per ADR:
Source: Google

Normally, a surge in output and exports should benefit Gazprom. However, a combination of shrinking free cash flows (down 52% q/q to $112 million in Q1'17), a massive capital commitment to the China pipeline, and uncertainty over its export monopoly must make investors uneasy. 

And the brave decision of Gazprom's management to commit to a date to start gas supplies to China (December 20, 2019) will go down in history.... either as the company's ability to deliver a monumental project on time and on budget, or as a example of monumental folly.

Gazprom's progress on this will be closely tracked. Photo: Shutterstock

— Edited by Michael McKenna

Nadia Kazakova is a Russian oil and gas specialist


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