Russia is likely to call on fellow oil producers to change the measurement of Moscow’s output when most of the world’s largest oil-producing nations meet in Vienna next month, Russian and OPEC sources say.
OPEC and non-OPEC nations have been curbing oil output for three years to balance the market and support prices, but Russia has measured its output differs from the others.
In addition to Saudi Arabia and other OPEC nations, Russia has included in its crude oil production numbers condensate-a high-premium light form of crude oil produced primarily through gas production.
This has not caused any problems for Moscow in the past, but with Russia launching new gas fields in the Arctic and Eastern Siberia and opening a new gas pipeline to China, its production of gas condensate is increasing.
This means that, according to sources from Russia and OPEC, it does not comply with its quota under the pact reached by OPEC and non-OPEC producers, something it is keen to avoid.
“Russia will certainly intensify the condensate problem as its production increases at the December conference,” said one of the sources familiar with the Russian situation.
OPEC and non-OPEC oil producers are expected to meet on December 5-6 in Vienna.
The sources did not say that Russia will make other OPEC commitments conditional on OPEC promising to change Moscow’s cap, such as extending or expanding their oil production cuts to next year.
However, the discussion could further complicate the OPEC and allies meeting, known as OPEC+, which is already set to correspond with the share offer of Saudi Aramco.
“The whole idea of excluding condensate came out as a result of an increase in gas output in Russia and thus an increase in the production of associated gas condensate,” a second source familiar with the Russian position said, adding that Russia was bound to raise the issue.
Russian Energy Minister Alexander Novak said the OPEC+ meeting on Wednesday may be discussing the adjustment of oil output quotas, but has not been elaborated. The Russian Ministry of Energy has not responded to a statement request.
A broad East Siberian field was opened in September by NEW FIELDSRussia to supply the new gas pipeline to China. Russian gas pipeline supply monopoly Gazprom (GAZP.MM), which provides a quarter of Europe’s energy, is also facing increased winter demand from Europe.
As Gazprom delivers near-record volumes this winter to European customers, it is forced to produce more condensate.
For 2019, Russia decided to reduce its oil production by 228,000 barrels per day (BPD) to about 11.18 million BPD as part of the overall reduction of 1.2 million BPD or 1.2% of global demand by the OPEC+ group of producers.
Nevertheless, this year’s production from Russia was 11.25 million BPD, which suggests it is overproducing by around 70,000 BPD, according to Reuters Estimates.
Most of the overproduction includes gas condensate, with its supply rising by 4% to about 770,000 BPD in January-October 2019, Russian energy data show. Nm m,k