Russia's first-half oil output up despite June slip

MOSCOW Mon Jul 2, 2012 7:14am EDT

Russian President Vladimir Putin speaks before a state dinner with Israeli President Shimon Peres (not pictured) in Jerusalem June 25, 2012. REUTERS/Lior Mizrahi/Pool

Russian President Vladimir Putin speaks before a state dinner with Israeli President Shimon Peres (not pictured) in Jerusalem June 25, 2012.

Credit: Reuters/Lior Mizrahi/Pool

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MOSCOW (Reuters) - Top oil producer Russia is on course for its highest output in the post-Soviet era this year helped by new fields after a 1.1 percent rise in the first half, Energy Ministry data showed on Monday.

Russia is aiming to increase its overall 2012 crude production by around 1 percent after adding 1.2 percent last year to reach a post-Soviet era high of 10.27 million barrels per day (bpd), or 511 million tonnes.

Crude output in the first half of 2012 increased by 1.1 percent to 10.33 million bpd on average.

"I believe we will reach a 1 percent rise for the year. The pace slowed in June, but further production will depend on oil prices. Another tool for crude output increase, tax regime changes, is unlikely to happen," Sergei Vakhrameyev from brokerage Metropol said.

The first-half rise came despite slipping in June by 0.2 percent to 10.32 million barrels per day (bpd) from 10.34 million bpd in May. In tonnes, the ministry said crude production last month stood at 42.228 million.

Still, that remained ahead of Saudi Arabia, which produced 10.1 million bpd in June.

Gazprom Neft, the oil arm of the world's top natural gas producer Gazprom, increased oil output by around 3 percent without acquisitions in the first half, Metropol's Vakhrameyev said.

He said that reflected its continued efforts to speed up extraction at new fields in West Siberia.

Russia is moving east from West Siberia, its traditional oil region, in an attempt to keep crude production at no less than 10 million bpd over the next 10 years.

TIGHT GAS

But some analysts see big potential in West Siberia, rich with untapped resources of so-called unconventional, or tight, oil, hidden deeper down than traditional oil layers.

Forecasts for steady crude production growth in Russia were propped up by OPEC last week when the cartel said it expected global oil demand to show steady growth, particularly from big developing countries, despite the economic slowdown.

Oil prices dipped sharply in the second quarter when front-month Brent fell by $25.08 a barrel, or 20.4 percent, in its biggest quarterly percentage loss since the last quarter of 2008 when it plunged by 53.6 percent.

But prices rose significantly on Friday and analysts say the move could portend stronger fundamentals for oil for the rest of the year as sanctions against Iran cut the OPEC member's output.

GAS OUTPUT DOWN

Daily gas production continued to slide, decreasing to 1.54 billion cubic metres (bcm) in June from 1.67 bcm in May.

Output at Gazprom declined to 1.11 bcm a day last month from 1.21 bcm in May amid a seasonal fall in demand.

The company said on Friday it was sticking to its production forecast of 528 bcm (1.44 bcm a day) for the year.

Gazprom so far has been upbeat about its operational data, expecting exports to Europe, its key source of revenue, to remain steady this year, at 150 bcm.

But analysts doubt the company's ability to keep its 27-percent share of the European gas market given unfavourable financial conditions in the euro zone and rivalry from the spot market and cheaper fuel such as liquefied natural gas.

(Reporting by Vladimir Soldatkin; Editing by Lidia Kelly and Jason Neely)

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