Russian crude oil exports would rise this year - Mr Novak
Mr Alexander Novak, Russian Energy Minister, said that Russian crude oil exports are expected to rise this year and beyond as volumes are diverted away from domestic refineries which are cutting capacity as part of a modernisation drive.
Mr Novak said that Russia, one of the world's biggest oil producers, will maintain its crude oil output at over 10 million barrels per day, despite some expectations of a plunge in production due to lower prices.
He said that Russia will continue consultations with the Organization of the Petroleum Exporting Countries. Russia will meet OPEC officials in June in Vienna to discuss the impact of shale oil production on global oil markets.
Up to now, Russia has been cutting crude oil exports and instead sending much of its crude production to domestic refineries, a move that offers better margins than selling crude to the market at current low prices.
Mr Novak said that but crude oil exports are seen rising by up to 3 million tonne in 2015 and to 280 million tonne per year by 2035 from 224 million tonne in 2014.
Since 2000, refinery output in Russia has grown by over 45% to 294 million tonne per year in 2014. That is on a par with the peak reached in the mid-1980s when the Red Army needed fuel for its campaign in Afghanistan.
Under the modernisation programme, Russia's refineries will switch to produce fewer low-quality products such as fuel oil and more high-quality products such as diesel and gasoline but in lower volumes.
Mr Novak said that "The strategy is to cut refining throughput. That's due to an increase in light products output on the back of modernisation."
He forecast a decrease in oil product output to 291 million tonne in 2015 and further to 280 million tonne by 2035.
Consultants EY, which advise the Energy Ministry on taxes, said that they expect a rise in Russian diesel production to 33% of the domestic oil product basket by 2020, from 26% in 2013.
The growth in refinery production and improvements in oil product quality have so far continued, despite Western sanctions over Moscow's role in the Ukraine conflict. According to the Energy Ministry, 19 new units are expected to be commissioned at Russian refineries in 2015 against eight in 2014.
Mr Novak said that there was no need for new refineries, while outdated plants would be closed.
He said that "Ineffective plants will cease to exist due to competition."
Mr Novak said that Russia planned to export 31 million tonne of oil to China this year up 3 million tonne from 2014.
Lukoil has predicted that Russian oil production may be down 8% by the end of next year as low prices force companies to cut back on drilling in Siberia.
Mr Novak dismissed such a pessimistic scenario, saying crude oil output will stay this year at 525 million to 527 million tonne.
He said that "We don't expect any cuts despite lower prices and some other problems."
He added that Russia still expects to pump at a rate of 505 million to 525 million tonnes annually through to 2035. The fall in global oil prices was mitigated by the fact that many oil firms' costs were in roubles and the currency has been losing value.
He further added that “Still, Russian oil companies will reduce their investment programmes by 10% to 15%, awaiting better times when crude oil prices recover. Globally, over USD 1 trillion of investments were postponed due to lower oil prices.”
Source - Reuters