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Russia Experiences Record Year in Oil, Gas

Russia Experiences Record Year in Oil, Gas

Monday, 8 January, 2018 - 12:15
The company logo of Russian natural gas producer Gazprom is seen on an advertisement installed on the roof of a building in St. Petersburg, November 14, 2013. REUTERS/Alexander Demianchuk

The year 2017 witnessed record levels in oil and natural gas production and gas exports to Europe, which is the most important market for Russian gas.

Russia's successes have not stopped at this point as the country seeks to become a bigger player in the liquefied natural gas (LNG) market and export more crude oil and gas to China, the world's largest energy consumer.

The most important things in the energy sector currently between Russia and China are due to the Russian-Chinese rapprochement, which resulted in more pipelines between them and more crude oil exports, replacing Saudi Arabia as the top exporter to China.

With the beginning of 2018, the two countries doubled China’s ESPO crude import capacity to 30 million tons annually, or about 600,000 barrels a day.

The development of the ESPO crude network will help increase Russia's exports to Asia. The pipeline will directly supply China with oil from eastern Russia as well as a direct pipeline to the Russian port of Kozmino to export ESPO crude via ships to the rest of Asian countries.

Russia exported 54 million metric tons from January till November 2017 to China, 15.5 percent more compared to the same period in 2016.

Saudi Arabia, the world's most committed to cutting global output, remains second with China's imports of Saudi oil this year growing by 0.1 percent.

“Russia's gas exports to Europe and Turkey rose by 8.1 percent to a record high 193.9 billion cubic meters (bcm) in 2017,” head of Gazprom Alexei Miller said in a statement on Wednesday, despite EU efforts to cut its reliance on Russian energy.

Gazprom, run by Miller, a close ally of Russian President Vladimir Putin, supplies more than a third of the European Union's gas.

However, the European Commission has called on EU member states to curb their reliance on Russian energy following Moscow's 2014 annexation of Crimea from Ukraine and a clash over gas deliveries between Kiev and Moscow that saw Gazprom cut off supply.

Gazprom said its gas deliveries to its largest customer, Germany, jumped by 7.1 percent to 53.4 bcm last year, a new record high.

To help safeguard its market share, Gazprom has quietly agreed price deals with big customers and caved in to EU rules it once flouted. Gazprom sources said they have drawn lessons from recent defeats on the European gas market.

Lithuania, which began importing LNG from Norway in 2014 and became the first ex-Soviet state to buy US natural gas in August, refused to renew its contract in 2015.

The company faces more trouble, analysts said, as its major long-term contracts expire between 2021 and 2035. Poland, a gas client since 1944, has said it will not renew its contract in 2022.

On the other hand, Russian natural gas production rose to an all-time high in 2017, supported by increased exports to Europe as well as rising domestic demand.

Government data published Tuesday showed that output jumped 7.9 percent to beat a 2011 record.

With plans to expand into China and new liquefied natural gas plants, the country may close the gap on the US, which leapfrogged Russia to the top spot in global production of the fuel nine years ago, according to Bloomberg.

In terms of its production of oil, Russia’s oil output increased to an average 10.98 million barrels a day in 2017, up 0.1 percent from the previous year.

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