Russian oil extraction hits three year low
The contamination of Urals oil with chlorides and the subsequent suspension of the Druzhba pipeline, which accounts for 20% of Russia’s oil exports, has forced oil companies to drastically cut down on extraction.
In the first three days of June, the average extraction of oil and gas condensate in Russia fell from 11.11 to 11.87 million barrels per day, a source familiar with the operational statistics told Reuters.
Compared to March, extraction has decreased by 430,000 barrels per day (3.8%), and by 551,000 (4.8%) compared to the record high in October last year. The present level is the lowest since summer 2016.
As a result, Russia has not only fulfilled, but even surpassed its obligations according to the OPEC+ deal, an agreement between the largest oil exporters to remove 1.2 million barrels of daily volume from the supply.
Russia’s quota is 11.19 million barrels per day, and entails a reduction of 228,000 from last year’s October high. Before April, Russia was meeting only 50-60% of its obligation, but the capacity deficit resulting from the Druzhba incident has forced Transneft and the Russian oil companies to scale down oil transit through the pipe.
At present, Russia is exceeding its OPEC+ obligations by 41%. The suspension of the Druzhba pipeline has affected Rosneft, Tatneft and Gazprom Neft the worst: their export volumes have declined by 10%, 69% and 24% respectively, according the Central Dispatch Control Center in Russia.
The oil and gas company Surgutneftegas was forced to suspend its usage of the pipe and increase its sea transit by one third.
The total exports through Druzhba in May fell by 37%, or 2.4 million tons, and the ports have been unable to compensate for it, selling only 15% more, or 1.8 million tons.
In addition to the 1.2 million tons of dirty oil, which buyers refused to accept and which Russia is pumping back from Europe and Belarus, there are also 600,000 tons that were extracted from the surface, but did not find a buyer.
“The force majeure on Druzhba has resulted in Russian oil volumes being replaced with other sources, damaging the Russian industry as a whole,” said Rosneft CEO Igor Sechin at an annual shareholder assembly on 4 June.
“Transneft assures us that all losses, both the extractors’ and the buyers’, will be compensated, and that there will be no repeats of incidents like April’s,” he said, adding that he trusts Transneft.
Experts estimate that the protracted downtime on the Druzhba pipeline, which has gone on for more than a month already, a record in the pipe’s history, will cost Russia at least $5 billion in lost export revenue by the end of the year.