The export of Russian oil to Europe in 2015 has increased by more than 8%, to 150 million tonnes, or about 3 million barrels./day it follows from calculations by Bloomberg, based on data of the Ministry of energy of the Russian Federation.
Total exports of Russian oil to all countries of the world in 2015 increased for the first time since 2009, according to figures of the Ministry. In 2009 its volume amounted to 248.3 million tonnes, and up to 2014 it has decreased, reaching the level of 221,3 million tons last year, the export of Russian oil has made 241,8 million tonnes.
Weak ruble, low capital costs and favourable tax system allowed Russian oil companies to achieve record production figures. The increase in the refinery margin in terms of the collapse in oil prices has increased the demand for Russian oil from European refineries. Russia reacted promptly to this trend, says Bloomberg.
The increased demand
“Last year, Russian oil exporters were the stars, said to Bloomberg by phone oil and gas analyst at JSC “Gazprombank” Alexander Nazarov. The demand from European refineries has increased due to low oil prices, domestic consumption declined and production increased due to the launch of new projects”.
Thus, Moscow is not worried about the Saudi expansion into traditionally Russian markets. The effect of the inflow of new volumes of middle East oil to the European market proved to be insignificant for Russia, the Agency said Richard Mallinson, analyst at Energy Aspects Ltd. “Saudi Arabia is beginning an attempt to enter new markets of Eastern Europe only at the end of the year,” he added.
In this year Russia can continue to increase oil exports to the European market in terms of production growth, said Nazarov. In March, Russian oil producers have updated a post-Soviet record production level 10,91 MB/day, preliminary data.
Although this year because of rising oil prices — they pushed off from the bottom at $28,21 per barrel. Brent crude in January — margin European refinery has started to decrease, it remains sufficient to meet production, working on the Russian raw materials, said the Agency by telephone, Oleg Galbur, a senior analyst at Raiffeisen Centrobank AG. According to Nazarov, oil exports from Russia may continue to increase in 2016 in the context of increasing production, continuing high demand from refineries and the limited potential for supply growth from competitors. “We expect that the stars will be more favorable to Russian exporters of oil,” he said.
The current level of prices (a barrel of Brent was trading at 17:00 GMT Friday to $41,14) almost reached Moscow acceptable level. The Russian authorities consider the price of a barrel of oil at $45-50 is acceptable to balance supply and demand on the world market, reported on Wednesday by Reuters citing a source informed about the Russian plans. Ahead of the meeting of oil exporters in Qatar on April 17, discussed the question of how long it is supposed to freeze the oil and how they will be monitoring the execution of the agreement, said one of the interlocutors of the Agency. “The level of $45-50 (per barrel) is acceptable from the point of view of balance in the market. If prices rise higher, they can begin the recovery of shale oil”, — the source explained.
In the agreement there are two obstacles — intent of Iran wanting to play the lost during the years of sanctions position in the oil market, and the willingness of the participants of arrangements to do it.
This week the Minister of the country’s oil Bijan Zanganeh said that oil production in the country was in February, about 3.1 million barrels./day. This target, according to the Minister, 4 million barrels./day. will be achieved by March 2017, indicating a slowdown in production growth. The Islamic Republic can make a direct competition to Russia in the global market. Russian energy Minister Alexander Novak on Friday in Novokuznetsk expressed hope that Iran still agrees with the consolidated position.
As to the violations of the agreements about the freezing, Goldman Sachs, for example, predicts that the production of oil and condensate production will grow in Russia in 2017, contrary to the agreement. Production in Russia will increase from 11.1 million barrels./day. to 11.2 million barrels./day stated in the note to analysts of Bank of 7 April.
The tax burden
Support the growth of oil production in Russia has a weak ruble, which reduces the costs of companies and adapt to the cost of a barrel of rates of export duties on oil, analysts say Goldman Sachs. When the cost of oil $40/bbl. with every barrel of oil remains $6 free cash flow (i.e. cash balance from operating activities excluding taxes and capital), while the price of oil at $100/bbl. the companies remained free to $8/bbl., it follows from the note. Rosneft, for example, free cash flow for 2015 grew by 10.2%.
However, the Russian authorities do not exclude raising taxes on the oil and gas industry to reduce the increased budget deficits. In particular, the government shelved plans to reduce export duties on oil, preferring to freeze and to raise excise taxes, which increased the total tax burden this year.
“We believe that Rosneft opens the most attractive options for how to increase production of Russian oil, and its reserves,” the document shows. The security of Rosneft’s proved oil reserves is 20 years. In addition, the company has an attractive portfolio of Greenfield projects, and could provide 11% free cash flow to capitalization with quotes in the $40/bbl., notes Goldman Sachs.