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  • Jan 6th, 2004
  • Comments Off on Russian oil growth hits new high for fifth year
Russian oil output and exports rose over 10 percent in 2003 and the world's second largest oil industry, booming for the last five years, ended the year with record December results, Energy Ministry sources said on Monday.

Oil exports via the state pipeline monopoly Transneft rose by 230,000 barrels per day in December to reach a record level of 3.74 million bpd, mainly due to new facilities in the Baltic Sea port of Primorsk.

Output hit another post-Soviet high in December of 8.82 million bpd after failing to rise for first time in a year in November, when it stood at 8.79 million bpd amid concerns that a judicial attack on Russia's biggest oil firm YUKOS may slow down the growth.

Output for the whole year rose 11 percent to 8.46 million bpd as oil firms continued to invest in new Siberian fields.

Full-year pipeline exports increased by 12 percent in 2003 to hit 3.4 million bpd, an all-time high for Transneft, which spent the year upgrading pipelines to central Europe and expanding its main port of Primorsk.

Full-year results beat the most optimistic forecast, including those of the Energy Ministry, which did not expect the output to exceed 8.20 million bpd in 2003.

Last week, the ministry said it expected oil output growth to slow down significantly in 2004, rising to 8.68 million bpd or a mere 2.5 percent increase compared with 2003.

This would be positive for the oil cartel Opec, which has been curbing its production for the last few years to support oil prices but saw its market share shrinking as non-Opec Russia stepped up its exports capacity.

Industry sources say Russia is consuming only two million bpd at home, which means that more than six million bpd leave the country via Transneft and alternative exports routes.

The energy ministry has been regularly underestimating Russian oil output growth in the past few years, but experts say the government has become increasingly keen to cap the ambitious oil output plans of its private oil majors.

Government officials have said Russia, the world's second largest oil exporter after Saudi Arabia, should maintain output at nine million bpd for the long term.

Oil majors have said they had enough reserves to quickly push Russian production up to record Soviet-era levels of 12 million bpd, thus outpacing Saudi Arabia as the world's top oil nation.

Industry analysts say the state has dramatically increased its influence over the oil industry in the last few months since it started legal attacks on YUKOS.

YUKOS's key owner and Russia's richest man Mikhail Khodorkovsky was arrested in October on charges of massive fraud and tax evasion, a move widely believed to be designed by the Kremlin to block the billionaire's political activities.

Khodorkovsky was a key supporter of Russia's accelerated oil growth and new private pipeline construction, including to China and the Arctic port of Murmansk, a move that would further weaken the state's grip on the oil sector.

Besides the arrest of key owners, YUKOS itself is facing a $3.3-billion tax claim and a possible withdrawal of lucrative Siberian oil licences.

Analysts say both moves would make it difficult for YUKOS, the country's fastest growing oil major, to survive in its current form and add the attacks on it would encourage other majors to obey state orders, including those to cap output.

YUKOS, whose output has almost doubled in the past five years, produced 1.62 million bpd in 2003, slightly outpacing its rival LUKOIL for the first time in 10 years to become the country's biggest oil firm.

But analysts said LUKOIL may regain its leadership this year after YUKOS failed to merge with smaller Sibneft.

"I would not exclude that YUKOS will be producing no more than 50 million tonnes (one million bpd) by the end of this year given all its today's troubles," said an industry source.

Oil firm TNK, in which BP owns 50 percent, outpaced Surgut to become Russia's third largest producer in 2003 with output at 1.24 million bpd, including Sidanco but excluding Slavneft, which it owns together with Sibneft.

Copyright Reuters, 2004


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