MOSCOW (Reuters) - Russia's oil output hit a post-Soviet high in October as a beefed-up Rosneft (ROSN.MM), soon to be the world's biggest crude supplier, dug deeper into hard-to-reach fields.
The increased drilling helped lift Russia's oil output by 0.5 percent in October to 10.46 million barrels per day (bpd), data from Russia's Energy Ministry showed, keeping the country safely in the position of world's largest crude producer ahead of Saudi Arabia.
The Kremlin is keen to maintain production of oil, a key source of revenue for the state coffers, at no less than 10 million bpd over the next decade.
Oil and gas account for about 20 percent of Russian gross domestic product and provide about half the government's revenue after a decade-long boom in which production rose to more than 10 million bpd in 2011 from less than 7 million bpd in 2001.
Last month's increase was driven by top producer Rosneft - set to acquire Anglo-Russian TNK-BP TNBP.MM for $55 billion - which increased output by 0.9 percent thanks to a 4.5 percent increase at its prized Vankor development in East Siberia.
However Russian production is still short of the peak of 11.41 million bpd set in 1988, when it was part of the Soviet Union, according to energy watchdog the International Energy Agency.
Russia's Energy Ministry said Russia's crude oil production in tonnes reached 44.23 million last month. For the first 10 months of the year, output averaged at 10.35 million bpd.
Russia's crude production stayed above the 9.95 million bpd pumped last month by Saudi Arabia, which, unlike Russia, has spare capacity to produce more oil.
As the Russian domestic oil market is already fully supplied, any increase in oil production will necessarily mean an increase in exports.
Rosneft, under the leadership since May of Chief Executive Igor Sechin, bucked the worldwide trend of falling production at the world's other top oil and gas companies, which are struggling to deliver the output growth they need to outpace the burgeoning cost of exploration and development.
For example, world No. 1 Exxon Mobil Corp's (XOM.N) oil and gas output fell by 7.5 percent in the third quarter, even as the company raised its capital and exploration expenditures 7 percent to $9.2 billion.
The Russian group on Thursday beat forecasts with quarterly net income of 181 billion roubles ($5.8 billion).
"The flagship (Rosneft) is feeling great. There were some apprehensions that the company would be much politicized when the new management arrived and would overlook operational results. But yesterday's financial results are also saying that everything is OK with Rosneft," Ildar Davletshin from Renaissance Capital said.
With oil and gas assets tightly controlled by well-endowed countries in the Middle East and elsewhere, the private sector is spending more and more in deeper water and harsher environments such as the Arctic.
Oil production at TNK-BP stayed flat as falling output at its depleted West Siberian oil fields was offset by increasing production from newly developed deposits.
After the merger, Rosneft's oil production will climb to 4.6 million bpd, the largest among the world's listed crude producers.
Russia's daily natural gas production rose 4.8 percent month on month to 1.75 billion cubic meters (bcm), thanks to seasonal demand for the fuel.
Gas output at Gazprom (GAZP.MM), the world's largest natural gas producer, rose 5.2 percent month-on-month to 1.27 bcm per day. (Editing by Lidia Kelly and David Holmes)