Russia is in the process of modernizing OPEC + to change the method of calculating oil production[/rtl]
[rtl]Date: Edit: 2019/11/27 19:44 • 65 times read[/rtl]
Russia is likely to call on other oil producers to change the way it calculates Moscow's production when most of the major oil-producing countries meet in Vienna next month, Russian OPEC sources have said.
OPEC and other producers have been curbing oil production for three years to balance the market and boost prices, but Russia measures its output differently.
Unlike Saudi Arabia and other OEC producers, Russia introduces condensate - a light, high-quality type of crude oil often extracted during gas production - into its crude oil production figures.
This has not been a problem for Moscow in the past, but with Russia launching new gas fields in the Arctic and eastern Siberia and opening a pipeline to transport gas to China, its gas condensate production is increasing.
This means that it does not comply with its quota under the agreement between OPEC and other producers, which they want to avoid, according to sources.
"Russia will inevitably raise the issue of condensate at the December meeting because its production will grow," said one source familiar with the Russian position.
OPEC and other producers are due to meet in Vienna on December 5 and 6.
The sources did not say whether Russia would make other deals with OPEC conditional on the group's approval to change Moscow's quota, such as extending or deepening oil production cuts next year.
But the debate could further complicate the meeting of OPEC and its allies, known as OPEC +, which coincides with the launch of Saudi Aramco shares.
"The idea of excluding condensates was entirely the result of increased gas production in Russia and hence the associated gas condensate," said a second source familiar with the Russian position, adding that Russia was definitely moving to raise the issue.
Russian Energy Minister Alexander Novak said on Wednesday that the OPEC + meeting might discuss amending output quotas, but gave no further details. Novak did not respond to a request for comment.
Russia launched a major field in eastern Siberia in September to feed the new gas pipeline to China. Gazprom, which monopolizes Russian gas pipelines and supplies a third of Europe's gas needs, faces a surge in demand from Europe over the winter.
With Gazprom supplying its European customers in near-record quantities this winter, it is forced to produce more condensate.
“It is difficult to increase gas production without increasing condensate production. In short, capacitors come from our gas and not from our oil sector. If you try to reduce condensate production while increasing gas production, it will hurt the field. ”
Russia has cut its crude oil production along with OPEC since 2017 to help support prices at around $ 50 to $ 70 a barrel despite a US production boom.
For 2019, Russia has agreed to cut its oil production by 228,000 bpd to around 11.18 million bpd, as part of a total OPEC + cut of 1.2 million bpd, equivalent to 1.2 percent of global demand.
Despite this, Russia's production this year averaged 11.25 million barrels per day, which means excess production by about 70 thousand barrels per day, according to Reuters calculations.
Data from the Russian Energy Ministry shows that most of the excess production is related to condensate, which increased production by 4 percent in the period from January to October 2019 to about 770 thousand barrels per day.
Gazprom and Novatek, Russia's second-largest gas producer, contributed most of the increase.
In comparison, the UAE produces about 700,000 bpd of condensate, while Saudi Arabia and Nigeria produce about 400,000 bpd each.