UPDATE 2-Russia's Aug oil hits post-Soviet high of 10.38 mln bpd

Sun Sep 2, 2012 4:34am EDT

Related Topics

* Oil production up 0.4 pct from July

* Oil output at Rosneft's Vankor field jumped 12 percent

* Analysts say tight oil is the next source of growth

* Gas output stops sliding, stays unchanged at 1.45 bcm

By Vladimir Soldatkin

MOSCOW, Sept 2 (Reuters) - Russia extracted oil at a record pace of 10.38 million barrels per day in August, a level unseen since the collapse of the Soviet Union, as companies took advantage of high oil prices, Energy Ministry data showed on Sunday.

Rising production will be welcomed by the administration of President Vladimir Putin, who embarked on a social programme spending spree prior to his election campaign and return to the Kremlin in May. Oil and gas sales account for about half of state revenues.

Russian oil output, the world's largest, edged up 0.4 percent in August from 10.34 million bpd in July. In tonnes, the ministry said crude production in Russia stood at 43.89 million last month.

The previous record level of 10.36 million bpd was reached in the first three months of this year.

Russia aims to maintain crude production of no less than 10 million bpd within the next 10 years. Last week, Russia's Economy Ministry raised its forecast for 2012 oil production to 514 million tonnes (10.3 million bpd) from its previous 510 million-tonne projection.

Russia remained the world's top crude producer, ahead of quota-bound Saudi Arabia, which produced 9.95 million bpd last month.

In August, oil prices jumped 9.2 percent, the biggest monthly percentage increase since prices rose by 10.5 percent in February, and extended a 7 percent rally in July as a result of tension over Iran's nuclear programme, and hopes of more monetary easing that could spur economic growth and support oil demand.

Oil producers in Russia benefited from the European Union's embargo on imports from Iran, which started in July. Russian, Iraqi and Saudi crudes have been the main grades to replace Iranian oil since the sanctions were imposed.

"TIGHT OIL"

Russia is hunting for new sources of oil in East Siberia and the Arctic as production in West Siberia falls due to highly depleted deposits. Analysts say next year's production should be lifted by Gazprom's Prirazlomnoye deposit - the first Arctic offshore field, which Russia is about to start developing.

Another source of crude production growth in Russia is "tight oil", hidden between layers of rock and mostly untapped.

Russian companies have increased drilling tight oil reserves in expectation of tax benefits, said analyst Valery Nesterov at brokerage Troika Dialog.

"The Russian government is closely monitoring the oil industry. It is doing everything so Russia remains a leader in crude production. Tight oil is the next large contributor into overall oil output growth," he said.

Russia's tight oil potential was highlighted earlier this year when ExxonMobil, as part of its agreement with Rosneft, brought the Russian state oil company into two unconventional projects in North America as a means of exposing to Rosneft to drilling techniques it might use in Siberia.

Rosneft estimates it has about 2.5 billion tonnes of unconventional oil reserves trapped in the Bazhenov formation in its West Siberian fields.

Last month, oil output at Rosneft, Russia's top crude producer, exceeded a monthly level of 10 million tonnes (2.36 mln bpd) for the first time as a result of a 12 percent increase at its new Vankor oilfield in East Siberia.

Russia's No.2 oil producer, LUKOIL, which expects its output to stabilise in 2012 after years of decline, increased production last month by 0.5 percent to 1.7 million bpd, boosted by improved results at its West Siberian units.

However, oil output at Anglo-Russian company TNK-BP fell 0.5 percent as production increases at its new Uvat and Verkhnechona fields failed to offset slowdown at its Samotlor and Orenburg subsidiaries.

Daily gas production in Russia halted its slide, staying unchanged month-on-month, at 1.45 billion cubic metres (bcm) in August.

Production at world's top natural gas producer Gazprom increased 0.4 percent to 1.03 bcm.

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