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Russiall Cover Oil Shortfall: Goldman

Russiall Cover Oil Shortfall: Goldman

Gold Silver Reports — International oil companies aren’t spending enough on the extra capacity needed to meet demand by the end of the decade. 

So, it will fall to countries like Russia to provide the additional production on which we will all depend. Can Russia do it? In a July 19 report, Goldman Sachs analysts painted a hopeful picture for Russian oil production ­­ putting the bank at odds with the forecast made earlier this year by the International Energy Agency. The latter, though, is more likely to be correct.

Russiall Cover Oil Shortfall: Goldman

Goldman expects growth in Russian production to accelerate, with output hitting 11.7 million barrels a day by 2018, an increase of almost 600,000 barrels a day from 2015.

By contrast, the IEA expects output to fall by 160,000 barrels a day over the same period.Rosneft accounts for more than a third of Russia’s output, so the oil giant’s performance over the coming years will be a big driver of what happens in Russia as a whole.

Worryingly, the company’s output has been steadily declining ever since it acquired TNK-BP in 2013. Production has fallen by 120,000 barrels a day , or 3%, since then.

Goldman Sachs expects a slew of new projects will increase output to 850,000 barrels a day by 2018 from 470,000 barrels a day last year.

But output from all of these fields will be limited by available pipeline capacity ­­ and it’s far from clear that there will be enough of it to support a 380,000 barrel-a-day increase in production over the next two-and-a-half years.

Meanwhile, Russia’s crude oil production should be higher this year than last.Production in the first half was up 180,000 barrels a day from the year-earlier period. But the figure for June was 80,000 down on January as output fell almost every month. That could make it more difficult to sustain year-on-year growth in 2017.Managing the decline in output from Russia’s ageing fields in the swamps of West Siberia will be crucial in determining whether the country will be able to boost production in coming years. Nowhere is that more important than at Rosneft. — Neal Bhai Reports

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