Olesya Astakhova

MOSCOW, may 20 (Reuters) the Ministry of energy promises to restore the capacity of oil production in Russia quickly after a few months or even weeks after the end of the restrictive trades OPEC+, but analysts familiar with the production process, the experts warn that it may take several years.

Pandemic coronavirus oil crisis of 2020 revealed the amazing ability of Russia to urgently remove from the market the millions of extra barrels. Now, many analysts, industry experts and market participants wonder how quickly after the restrictive trades OPEC+ Russia will be able to restore its production potential?

To cut production recovered very quickly, now the question is, how fast it will grow, said senior Director of the group on natural resources in the London office of Fitch Ratings Dmitry marinchenko.

By the end of April, when the OPEC transaction+ was not in effect, Russia has made 11,35 million barrels of oil and gas condensate.

The Ministry of energy of the Russian Federation predicts a rapid restoration of oil production after the completion of the transaction, the main part of the volume will be able to return in a few weeks, a small percentage of companies need about a month with a small to return to previous levels.

However, not all experts share the position of the Ministry of energy.

UTOPIA?

According to Roman Sudo, candidate of geological-mineralogical Sciences and a former chief geologist of the state Commission of the Russian Federation on mineral resources, history of oil production Russia 1990-ies shows that the restoration of the former building may take years.

To say that the prey can recover within weeks or months is unrealistic, its just a utopia. Oil extraction process is extremely complex, involving sharp cuts and sharp subsequent inclusions, it does not push the production pipeline, says Sudo.

According to him, the recovery of production on the project could run into at least quarters, but not weeks and months.

Senior analyst at the center for economic forecasting of Gazprombank, Kirill Kononov believes that given the commitments assumed by Russia under the Treaty OPEC+, the recovery of production should take 3 to 4 years.

The largest oil-producing province of Russia Yugra, which accounts for over 40% of oil production, said that after the deal is completed, the region will be able to return to the previous level of raw material production until two years later.

Under the Pact Russia cut oil production in may and June, approximately 19% from February 2020 to 10.5 million barrels per day. The overall reduction in raw materials production in Russia in 2020 will be 10% of the level in 2019, when the country produced 561 million tons of oil and gas condensate. The condensate is excluded from the transaction, its production in Russia is 0.7-0.8 million barrels per day.

The largest Russian oil company Rosneft (MCX:ROSN) announced last week that it plans to cut production in two stages: first, reduce the flow rate on higher margin projects, and after three months decide which of marginally profitable wells can be maintained, given the attendant risks.

According to marinchenko, there are no statistics showing what proportion of the reduction will be achieved by reducing flow rates (reduced well flow), and which due to the conservation of the wells (well suspension), it is difficult to predict the recovery rate of oil production in Russia.

The deal OPEC+ will continue until the spring of 2022 and provides for a gradual reduction of the volume reduction. According to its current conditions, oil production in Russia in two years will reach 9.5 million barrels compared to 8.5 million barrels in may-June 2020.

But given the fact that the output from the new transaction will be gradual, companies will have the opportunity to prepare, and no problems with the building of extraction should not occur hopes marinchenko.

However, the government of Yugra, the oil reserves which are mostly Mature since developed more than half a century, warned that some of the marginal wells after maintenance can be lost forever.

Geologist Sudo sure that marginal wells will never be able to go with the same flow rate after stopping for a few months. Fund marginal wells in Russia with high production of inventory tens of thousands, so some of these wells simply will not start without additional measures, which will require investment. But will these investments cost-effective at current oil prices?

The words of an expert on the need for additional investment to restore production after the limitation more than a few months, confirms the average production oil company Tatneft (MCX:TATN), which develops mostly in Mature projects.

Rosneft says that he sees no uncontrolled risks in the recovery of production, while the company warns of the danger of stopping their wells with viscous oil, as these projects are for the companys major growth point in the future. Other Russian companies are details not revealed his plans to reduce production of raw materials.

TO PREVENT!

In early April, after the transaction OPEC+, Russian energy Minister Alexander Novak said that Russian companies will not allow the loss of wells, reducing oil production. However, earlier threatened by the loss of wells was called by officials of the Russian Federation as a reason why Russia could not reduce production quickly in previous years.

The analyst Andrey Polishchuk from Raiffeisenbank believes that if wells gets hurt, then restore the production relatively soon, perhaps at the expense of more intensive drilling, this will reduce the recovery cycle of development wells, which may be less than a month. But then there is the question of economic feasibility of additional investments and expenses, the analyst says.

As for more intensive development of deposits can lead to lower oil recovery factor, it is likely more efficient to stretch the recovery of production for a longer period. Everything will depend on the price environment, puts Polishchuk.

Ugra authorities are warning that because of the depletion of deposits in the region to sustain production of raw materials necessary to drill, in conditions of low oil prices is unlikely to occur.

Roman Shipbuilding said that Russia in recent years were close to the limit of capacity in oil production, so the country has no new reserves that can be run quickly and efficiently.

New projects are additional attachments, the risk of insufficient knowledge and right shift for a few years to start and develop, said Sudo.

In addition, if the company wants to restore the productive capacity largely due to lightroomo production, that is, new projects with tax exemptions, the Ministry of Finance can block this fountain of generosity, the expert adds.

(Editors Ekaterina Golubkova and Mary Grabar)

Link:

ANALYSIS-Rapid recovery of Russian oil production after the release of the Covenant OPEC+: reality or utopia? - The Times Hub