Russia Oil & Gas Report Q1 2013 - New Report Available

Boston, MA -- (SBWIRE) -- 03/18/2013 -- BMI View: A high level of investment will be required to maintain Russian oil output at close to recent record levels, putting pressure on the domestic industry and hindering global expansion. Gazprom faces similar challenges in developing sufficient gas to meet European and, possibly, growing Asian demand. There have been promises made to reform Russia's tax and regulatory system, upon which further development of the oil and gas sector hinges. The realisation of Russia's oil and gas potential thus lies in unlocking the political gridlock that has prevented much needed reforms from taking place.

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

- Russian oil production reached a post-soviet high of 10.29mn barrels per day (b/d) in 2011 and is on track to achieving an even higher level in 2012, with output for the first nine months averaging 10.35mn b/d. This has exceeded the 10.34mn b/d targeted by the economy ministry for 2012. However, the ministry also warns that without further investment, output could flatline at 10.24b/d by 2020.
- BMI is forecasting average Russian production of 10.35mn b/d in 2012, with scope for an increase to 10.45mn b/d by 2016. However, we see output slipping from its 2016 peak to 10.20mn b/d by 2021.
- Oil consumption, which we estimate averaged 2.73mn b/d in 2011, should edge towards 3.15mn b/d by 2016 - providing export potential of 7.30mn b/d.
- With Russia having produced 662bn cubic metres (bcm) of gas in 2011, BMI's latest projections show output rising to 724bcm by 2016 - dependent on growth in European demand and opportunities arising in Asian markets. Gazprom expects that total exports will reach a recordhigh of 222bcm in 2012, but BMI believes these will not exceed 170bcm. This is particularly so with countries such as Ukraine and Poland seeking to take gas at the minimum level required in their take-or-pay long-term contracts with Gazprom. Our forecasts see gas exports hitting 199bcm by 2016, as domestic consumption reaches almost 526bcm.
- There will be considerable upside risks to our long-term forecasts for Russian oil and gas production and exports if the country manages to push through fiscal reforms that would significantly improve the country's business climate for foreign investment. This could help to speed up development of its underexplored offshore acreages - the Arctic and Caspian Sea - as well as its northern and eastern fields.
- Securing a gas supply contract with China could also push up its export numbers, though the current standstill in negotiations does not make us optimistic about the prospects of this materialising in the short-term.

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