News / Economy

Rise in Russian Oil Output Supports Overstretched Budget

FILE - A general view of a facility at the Russian Trebs and Titov oil fields near the Arctic village of Varandei, Russia, October 2013.
FILE - A general view of a facility at the Russian Trebs and Titov oil fields near the Arctic village of Varandei, Russia, October 2013.
Reuters
— Russia retained the title of the world's top oil producer, with 2013 output reaching a post-Soviet high as rising exports to China and strong prices allow the Kremlin to maintain record spending from an overstretched budget.

Energy has been the engine of Russia's growth during more than a decade of leadership by President Vladimir Putin, with oil and gas accounting for more than half of budget revenues.

But the government, which has amassed some of the world's largest foreign exchange reserves of more than $500 billion, has been increasingly overstretching its finances due to social spending promised by Putin before the 2012 election, as well as a swelling $50 billion budget for the 2014 Winter Olympics.

Keeping oil output high has therefore been a priority for the government. The rise has defied predictions that new fields in East Siberia and the Arctic will be unable to compensate for declines from aging oilfields in West Siberia.

“Enough investment is being made to slow declines in West Siberia and increase production in East Siberia in order to make for small net production increases,” analysts from the International Energy Agency [IEA] told Reuters on Thursday.

The IEA, the West's energy watchdog, expects Russian production to remain flat at about 10.5 million barrels per day [bpd] until the end of the decade, and then decrease to about 9.5 million bpd by 2035.

The IEA says the key to maintaining Russian production levels would be the Kremlin's ability to extract hard-to-recover oil, emulating U.S. successes, and to encourage more production in remote Arctic and East Siberia regions.

Despite record output, Russia's budget funding gap could reach some $300 billion between 2017 and 2020 should spending remain high and oil prices drop, according to the Finance Ministry's budget strategy to 2030.

That is three times the current value of the Reserve Fund, a rainy-day collection of windfall energy revenues.

Last year's budget was estimated to balance at an oil price of $110 per barrel and this year's at some $115 a barrel, according to Alfa Bank chief economist Natalia Orlova.

That is dangerously close to or even higher than current prices for benchmark Brent crude, which stood at an average of below $110 in 2013, and are expected to remain under downward pressure in years to come due to a U.S. shale oil boom and a possible rise in exports from Iran.

World's top

Russian energy ministry data showed on Thursday that the country's oil output rose to a post-Soviet high of 10.51 million bpd in 2013, up almost 1.4 percent from 2012.

December's monthly production averaged 10.63 million bpd, also a post-Soviet high.

Russian output likely stayed above that of Saudi Arabia, which kept production steady at roughly 9.7 million bpd in October and November. Saudi data for December is not yet available.

Almost all large Russian oil firms increased output in 2013 as they boosted drilling, including Lukoil, Russia's second-largest oil producer and top non-state oil company, which had logged declines in the previous three years.

State-controlled Rosneft, the world's top listed oil producer, posted a dramatic jump in output to 3.1 million bpd thanks to the acquisition of rival TNK-BP and production increases in East Siberia.

The year was also marked by a further diversion of Russian oil to China, away from saturated European markets, as eastbound flows rose by almost a fifth to 740,000 bpd.

As Russia agreed to increase deliveries further to China in coming years, the Asian giant will likely replace Germany as the largest customer for Russian pipeline oil in the first quarter of 2014.

Despite the jump in eastbound flows, Russian oil exports outside the former Soviet Union fell by about 2.5 percent to 4.53 million bpd as Russia ramped up oil refining.

Domestic refining rose by 180,000 bpd, reflecting the country's $55-billion program launched in 2011 to modernize its refineries and encourage exports of high-quality oil products.

Gazprom, the world's top gas producer, saw its output slip to 1.30 billion cubic meters [bcm] per day from 1.31 bcm per day in 2012, although its exports to Europe jumped 16 percent to a record 161.5 billion cubic meters.

You May Like

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Judge Declares Washington DC Ban on Public Handguns Unconstitutional

Ruling overturns capital city's prohibition on carrying guns in pubic More

Pricey Hepatitis C Drug Draws Criticism

Activists are using the International AIDS Conference to criticize drug companies for charging high prices for life-saving therapies More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.