Friday, August 24, 2007

FSU Exports June (August IEA report)

Former Soviet Union (FSU)

Russia – June actual, July provisional: Production data for June and July continued to show Russianoutput running around 2% ahead of 2006, averaging 9.9 mb/d. For July, Rosneft production, and thatfrom the seasonal Sakhalin 2 project, came in ahead of this report’s earlier expectations. However, thiswas offset by weaker than anticipated output from Lukoil, TNK-BP and Tatneft, leading to a 20 kb/ddownward reduction in the Russian production forecast for 3Q07 onwards. Moreover, stronger Rosneftperformance results in part from its now almost-complete takeover of former Yukos production assets.Either Rosneft or Gazprom are seen by most commentators as eventual owners of producer Russneft’sassets (300 kb/d) after owner Mikhail Gutseriyev’s end-July decision to sell up.

Russian growth in 2007 now comes in at 2.3% (+225 kb/d), followed by 1.8% (+175 kb/d) in 2008. Recentreports suggest that year-round Sakhalin 2 crude production could be attained earlier than this report’sassumption of end-2008. Also, Gazpromneft (formerly Sibneft) announced it will boost spending by 66%in 2007 in order to raise output. In both instances, this report retains a more cautious outlook until signsemerge that the higher targets are close to being reached. The economy ministry’s latest long-termproduction forecast sees output stable at 10.6 mb/d in 2015-2020. Our own MTOMR last month projected Russian output of 10.6 mb/d for 2010/2011 and 10.5 mb/d in 2012, potentially rising further by mid-decade.

Kazakhstan – June actual: June production (crude and condensate) came in 110 kb/d below earlier estimates, largely due to maintenance at the Tengiz field. This report had earlier assumed 3Q maintenance, so a 30 kb/d downward revision for 2Q07 is offset by a similar upward revision for 3Q, leaving the 2007 forecast largely unchanged at 1.36 mb/d. Production rises further in 2008 to 1.45 mb/d.

Further gains from Kazakhstan longer-term centre on the triumvirate of fields consisting of the existing Tengiz and Karachaganak and the currently underdevelopment Kashagan. Early August is due to see the government opening talks with Kashagan partners to renegotiate the field’s production sharing agreement, after delays have successively pushed back start-up from an original 2005 to a latest estimate of late 2010 (see MTOMR, July 2007, p38). Meanwhile, in early July, Karachaganak Petroleum Operating (KPO) BV awarded a front-end engineering and design (FEED) contract for phase three of the Karachaganak processing complex. This will substantially add to liquids production of 290 kb/d by 2012.

FSU net oil exports in June averaged 8.8 mb/d, some 270 kb/d lower than May levels. Crude exports fell by 450 kb/d following a 28% increase in Russian crude export duties, from 1 June, to $200/tonne. This was partially offset by a 190 kb/d increase in product exports, including an extra 160 kb/d of gasoil.

June crude exports of 5.98 mb/d were at a six-month low. On top of higher Russian export duties, maintenance at Novorossiysk contributed to a 220 kb/d drop in Black Sea volumes. Moreover, 110 kb/d less crude was exported via the Baltic in June. A 100 kb/d month-on-month decrease in Druzhba volumes, and lower CPC transits after Tengiz field maintenance, saw total crude volumes via the Transneft pipeline system falling by 350 kb/d. BTC pipeline exports from Azerbaijan in June were unchanged from May.

FSU exports in July could be up to 100 kb/d higher than in June, with loading schedules showing 50 kb/d more oil coming through the Transneft system and an extra 20 kb/d via BTC. However, a further hike of 12% in Russian export duties was due on 1 August. While this is set to reduce volumes exported through Transneft by up to 100 kb/d, a partial offset will come from higher Caspian volumes via BTC.

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