Russia has not increased its oil production as much as its rivals, the USA (<1.3%) and Saudi Arabia (<5.8%) this year, however Bloomberg reports that in the first 9 months of 2015, Russia did produce 0.5% more than 2014, according to figures produced by Citigroup Inc.
Everyone has been surprised by Russia’s production levels this year, including the Russian government itself, which according to reports did not think that this year would break the record for overall production in the country. The increase has largely been due to Russian companies squeezing every last drop of oil out of their existing assets. Bashneft has been particularly successful at this, and ‘has been the biggest single contributor to increased crude output this year’, says Bloomberg. Extraction from existing fields has been proved to be a very cost-effective method of production resulting in Bashneft shares being amongst the best performers on the Russian stock market this year.
Other initiatives which have contributed to Russia’s increase in production have come from new developments which were invested in before oil prices plummeted. Novatek and Gazpromneft’s venture in the Yamal region has low operating costs but high gas output.
Despite efforts, however, few believe that Russia will be able to sustain production at its current rate for more than a few years. Exploration drilling is down 21% this year and old Soviet fields will begin to run dry in the near future leaving a huge gap in production.
Russian companies do appear to be aware of the limitations of the older fields and this year has seen an increase in smaller new projects to offset the decline in the Western Siberian fields. Novatek began production this month at its new Arctic field (Yarudeyskoye) and ExxonMobil and the Irkutsk Oil Company have initiated new projects in Sakhalin and Siberia respectively.