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

Will Cuba Follow the Southeast Asia Model?

Decision to restore ties between US and Cuba has some debating whether it will lead to enhancement or regression of democracy for Communist island nation More

Kenyan Designer Finds Her Niche in Fashion Industry

‘Made in China’ fabrics underlie her success More

Report: CIA, Israel's Mossad Killed Senior Hezbollah Commander

The Washington Post story says Imad Mughniyah was killed instantly by a bomb "triggered remotely" from Tel Aviv by Mossad agents More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Jefferson's Library Continues to Impress, 200 Years Lateri
X
Deborah Block
January 31, 2015 12:12 AM
Two hundred years after the U.S. Congress purchased a huge collection of books belonging to former President Thomas Jefferson, it remains one of America’s greatest literal treasures and has become the centerpiece of Washington’s Library of Congress. VOA’s Deborah Block reports.
Video

Video Jefferson's Library Continues to Impress, 200 Years Later

Two hundred years after the U.S. Congress purchased a huge collection of books belonging to former President Thomas Jefferson, it remains one of America’s greatest literal treasures and has become the centerpiece of Washington’s Library of Congress. VOA’s Deborah Block reports.
Video

Video Egypt's Suez Canal Dreams Tempered by Continued Unrest

Egypt plans to expand the Suez Canal, raising hopes that the end of its economic crisis may be in sight. But some analysts say they expect the project may cost too much and take too long to make life better for everyday Egyptians. VOA's Heather Murdock reports.
Video

Video Threat of Creeping Lava Has Hawaiians on Edge

Residents of the small town of Pahoa on the Big Island of Hawaii face an advancing threat from the Kilauea volcano. Local residents are keeping a watchful eye on creeping lava. Mike O’Sullivan reports.
Video

Video Pro-Kremlin Youth Group Creatively Promotes 'Patriotic' Propaganda

As Russia's President Vladimir Putin faces international pressure over Ukraine and a failing economy, unofficial domestic groups are rallying to his support. One such youth organization, CET, or Network, uses creative multimedia to appeal to Russia's urban youth with patriotic propaganda. VOA's Daniel Schearf reports.
Video

Video Filmmakers Produce Hand-Painted Documentary on Van Gogh

The troubled life of the famous 19th century Dutch painter Vincent van Gogh has been told through many books and films, but never in the way a group of filmmakers now intends to do. "Loving Vincent " will be the first ever feature-length film made of animated hand-painted images, done in the style of the late artist. VOA’s George Putic reports.
Video

Video Issues or Ethnicity? Question Divides Nigeria

As Nigeria goes to the polls next month, many expect the two top presidential contenders to gain much of their support from constituencies organized along ethnic or religious lines. But are faith and regional blocs really what political power in Nigeria is about? Chris Stein reports.
Video

Video Rock-Consuming Organisms Alter Views of Life Processes

Scientists thought they knew much about how life works, until a discovery more than two decades ago challenged conventional beliefs. Scientists found that there are organisms that breathe rocks. And it is only recently that the scientific community is accepting that there are organisms that could get energy out of rocks. Correspondent Elizabeth Lee reports.
Video

Video Paris Attacks Highlight Global Weapons Black Market

As law enforcement officials piece together how the Paris and Belgian terror cells carried out their recent attacks, questions are being asked about how they obtained military grade assault weapons - which are illegal in the European Union. As VOA's Jeff Swicord reports, experts say there is a very active worldwide black market for these weapons, and criminals and terrorists are buying.
Video

Video Activists Accuse China of Targeting Religious Freedom

The U.S.-based Chinese religious rights group ChinaAid says 2014 was the worst year for religious freedom in China since the end of the Cultural Revolution. As Ye Fan reports, activists say Beijing has been tightening religious controls ever since Chinese leader Xi Jinping came to office. Hu Wei narrates.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Former Sudan 'Lost Boy' Becomes Chess Master in NYC

In the mid-1980’s, thousands of Sudanese boys escaped the country's civil war by walking for weeks, then months and finally for more than a year, up to 1,500 kilometers across three countries. The so-called Lost Boys of the Sudan had little time for games. But one of them later mastered the game of chess, and now teaches it to children in the New York area. VOA’s Bernard Shusman in New York has his story.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8845
JPY
USD
117.71
GBP
USD
0.6643
CAD
USD
1.2669
INR
USD
62.019

Rates may not be current.