Russia to Press OPEC+ to Change Oil Output Calculations
Business
London - Asharq Al-Awsat
Russia is likely to call on fellow oil producers to change the way Moscow’s output is measured when most of the world’s biggest oil-producing nations meet next month in Vienna, Russian and OPEC sources say. For three years OPEC and non-OPEC nations have curbed oil output in order to balance the market and support prices, but Russia has been measuring its production differently to the others. Unlike Saudi Arabia and other OPEC producers, Russia has been including condensate - a high-premium light type of crude oil mainly extracted during gas production - in its crude oil production numbers. In the past this has caused no problems for Moscow, but with Russia launching new gas fields in the Arctic and East Siberia and opening a new gas pipeline to China, its gas condensate production is rising. That means it is not complying with its quota under the pact reached by OPEC and non-OPEC producers, something it is keen to avoid, Russian and OPEC sources told Reuters. “Russia will definitely escalate the condensate issue at the December meeting as its production will be growing,” one of the sources familiar with the Russian position said. OPEC and non-OPEC oil producers are scheduled to meet in Vienna on Dec 5-6. The sources didn’t say whether Russia would make other agreements with OPEC conditional to OPEC agreeing to changing Moscow’s quota such as extending their oil production cuts to next year or deepening them. However, the debate could further complicate the meeting of OPEC and allies, known as OPEC+, which is already set to coincide with Saudi Aramco’s share offering. “The whole idea about excluding condensate came out because of a rise in gas output in Russia and hence an increase in associated gas condensate production,” said a second source familiar with the Russian position, adding Russia was bound to raise the issue. Russian Energy Minister Alexander Novak said on Wednesday the OPEC+ meeting may discuss adjusting oil output quotas, but did not elaborate. The Russian energy ministry did not respond to a request for comment. Russia launched a large East Siberian field in September to feed its new gas pipeline to China. Russian gas pipeline export monopoly Gazprom, which supplies a third of Europe’s gas, also faces higher demand from Europe during winter. As Gazprom supplies European customers with near record volumes this winter, it is forced to produce more condensate. “It is difficult to achieve higher output of gas without increasing output of condensate. So essentially, condensate is coming from our gas, not from our oil industry. If you try to reduce condensate production while boosting gas output, it badly affects the fields’ profile,” the second source said. Russia has been cutting its crude oil production in tandem with OPEC since 2017 to help support prices at around $50-$70 per barrel despite booming US production. For 2019, Russia agreed to reduce its oil output by 228,000 barrels per day (bpd) to around 11.18 million bpd as part of overall cuts by the OPEC+ group of producers of 1.2 million bpd or 1.2 percent of global demand. However, Russia’s output this year has averaged 11.25 million bpd, meaning it is overproducing by about 70,000 bpd, Reuters calculations show. Most of the overproduction relates to gas condensate, with output of it increasing by 4 percent in January-October 2019 to around 770,000 bpd, Russian energy data show. Gazprom and Russia’s second largest gas producer, Novatek, account for most of the increase. By comparison, the UAE produces some 700,000 bpd of condensate while Saudi Arabia and Nigeria each produce around 400,000 bpd.
from Asharq AL-awsat https://aawsat.com/english/home/article/2011776/russia-press-opec-change-oil-output-calculations
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