New Energy research report from Business Monitor International is now available from Fast Market Research

Boston, MA -- (SBWire) -- 12/11/2013 --Russia may be pumping post-Soviet record levels of oil and is likely to continue to see a short-term increase in both oil and gas production, but we warn that a high level of investment will be required to maintain this. It also faces pressure to diversify its gas markets, in view of slower demand growth expected from its core market in Europe and growing competition from other global gas suppliers. Tax breaks given to encourage offshore and tight oil developments could help support Russian oil and gas output in the longer term, though we warn that the consolidation of Rosneft's position in the country's upstream segment limits gains from regulatory changes to privileged firms with political connections in the country. It also threatens to squeeze out Russia's independent refiners owing to Rosneft's control of crude oil supplies to the market.

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The main trends and developments we highlight for Russia's oil & gas sector are:

- Russian oil production reached a post-soviet high of about 10.4mn barrels per day (b/d) in 2012, according to official figures from Russia and the EIA. In the first nine months of 2013, output hit an average of 10.5mn b/d. Recent changes to its tax regime - including tax breaks for tight oil and offshore production - promises to encourage investment and to support output, though we are more optimistic about additions from tight oil developments than offshore production within our forecast period. As such we have cautiously revised our oil production forecast upwards and expect it to stagnate at about 10.4mn b/d through to the end of our forecast period in 2022. Faster-than-expected development of its tight oil deposits particularly from the Bazhenov shale poses an upside risk to our outlook
- An increase in Russia's refining capacity, government policy and production from integrated producers such as Rosneft, Gazprom Neft and Lukoil would support an uptrend in the country's refined petroleum production. In particular, liquefied petroleum gases (LPG) could increase its mix. These underpin our forecasts for refined petroleum production to continue its growth from a forecast of 5.4mn b/d in 2013 to 5.5mn b/d in 2017. Thereafter, output is likely to be capped at 5.6mn b/d till the end of our forecast period to 2022 as efficiency gains from modernisation start to peter out. However, independent producers, hurt by a tightening in crude oil supplies available in the domestic market as a result of Rosneft's consolidation of its position in the upstream, could be excluded from the rewards of Russia's downstream expansion.

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