Related Articles
Outlook 2019
Forward article link
Share PDF with colleagues

Moscow calling the shots

Russia ramped up production in 2018, with Arctic developments playing a major role

Russia broadly aligned itself with Opec's efforts during 2018 to cut production and reduce a worldwide glut. The Russian Federation had significant bearing on the alliance's efforts to be successful.

The participating countries were seen beating estimates earlier in 2018, as oil producers exceeded their production cut commitments. The group did such a good job in cutting output that oil prices hit three-and-a-half-year highs in mid-2018. After that, Russia hit new production records. Despite market chatter in November that a new output reduction pact might be needed, Moscow appeared unconvinced that the global market would be oversupplied.

It was later reported that Rosneft, Russia's largest oil producer, would add 70,000 bl/d to its output in June. Despite the increase, the company reportedly remained in line with production constraints allocated under the Opec deal.

Meanwhile, Russia's E&P activity flourished. World Oil's data showed that Russia drilled 9,567 wells during 2017, an 11.4pc increase over the 8,585 wells spudded in 2016. For 2018, World Oil predicted another 5.5pc gain in drilling, to 10,093 wells, which is likely a post-Soviet Union record-high.

Novatek reported in December 2017 that its Yamal LNG project had begun producing from the first of three LNG trains. Each train, with a nameplate capacity of 5.5mn t/y, was constructed specially to withstand the harsh Arctic conditions of the Yamalo-Nenets Autonomous region. According to Total, which holds a 20pc interest in the project, the second train was commissioned in mid-2018 and the third train will go online in 2019. The project was approximately 94.3pc complete at the end of second-quarter 2018. The $27bn Yamal development processes natural gas from the giant onshore South Tambey gas and condensate field, on the Yamal Peninsula. It reportedly will produce about 4.6bn boe in reserves. At full capacity, the facility will supply 16.5mn t of LNG per year to Asia and Europe.

The Russian Federation had a significant bearing on Opec's efforts to cut production and prevent a worldwide glut

Just days after the start of production, the Yamal project exported its first cargo of LNG. The shipment was loaded onto the Christophe de Margerie tanker at Yamal's Port of Sabetta. The first shipment from the second train occurred in August 2018.

New discoveries were also materialising in 2018. In October, Novatek announced an impressive 11tr cf gas discovery in the North-Obsk license of the Ob Bay area. The firm is likely to implement a new LNG project from the find.

Further east, Genoil agreed to provide the necessary technology and direction to develop five oil and gas fields in the Sakha Republic (Yakutia), which is said to hold recoverable reserves of 1.8bn barrels. The $35bn project will employ the company's hydroconversion upgrader desulphurisation technology, which converts heavy or sour crude oil to more valuable low sulphur oil. The process reportedly is much less costly than traditional refining methods.

While the majority of Russian E&P is concentrated in the northwestern part of Siberia, several significant developments have taken place in the south, of late. In December 2017, Rosneft and Eni began drilling the Black Sea's first ultra-deep-water exploration well. Maria-1 is situated in the Zapadno-Chernomorskaya license area. It is expected to tap into resources that could exceed 4bn barrels.

Further east, in the Caspian Sea, Lukoil made progress with Phase 2 of the Vladimir Filanovsky field development. The field, off Astrakhan, is one of Russia's largest offshore oil fields, with 1.06tr cf of recoverable reserves. In July, Lukoil reported that it had completed construction and commissioning of the fifth well for Phase 2. Subsequently, the field's overall daily production remained at the plateau level of roughly 120,000bl/d. All Phase 2 construction and assembly operations were expected to be complete by year-end, according to the company. Meanwhile, the company is progressing with the field's third development stage. The substructure of a wellhead platform was installed offshore at the field in August; the platform's topside was being assembled at press time. The topside installation offshore and the wellhead platform commissioning are planned during 2019.

During July 2018, Lukoil updated the production performance at its Pyakyakhinskoye oil and gas condensate field, in the Yamal-Nenets Autonomous District. Cumulative natural gas production exceeded 5bn cm. The cumulative production of crude oil and gas condensate reached 2.7mn t since the start of commercial production in October 2016.

Also in this section
Opec+ creates Central Asian headache for IOCs
22 May 2020
Foreign companies tapping large fields in and around the Caspian Sea face tricky decisions on production cuts
PE Live: OFSE sector should embrace the transition
22 May 2020
As the pace of the energy transition accelerates, oilfield companies are increasingly applying their engineering expertise to a more diverse range of applications
Petrobras issues stark warning on oil
21 May 2020
Brazilian heavyweight announces huge losses on assets it believes are no longer commercially viable