Rosneft cuts oil output with an eye to ramping up again
By Vladimir Soldatkin and Katya Golubkova
MOSCOW (Reuters) – Russia’s Rosneft <ROSN.MM> is ready to resume full oil output quickly once OPEC-led cuts end as the country’s top producer has focused its own cuts on newer fields, its chief executive has said.
Those cuts run until June 30, though oil ministers from OPEC and non-OPEC countries meeting in Vienna this week are expected to agree to extend a deal that has seen 22 countries reduce global output by 1.8 million barrels per day (bpd) since January 1.
“Restrictions (under the OPEC deal) are mainly applied to greenfields,” Rosneft Chief Executive Igor Sechin told reporters last week, referring to newer oil fields.
“We will maintain mature fields as they are and won’t cut production there,” he said. “Our priority will be maintaining mature fields.”
Mature fields require the pumping of gas or liquid to increase crude flows and once that is halted, it takes time to restore the pressure. That is less of an issue at new fields, where the flow rate is usually higher.
STRUCTURE OF CUTS
Rosneft, the world’s top listed oil company by output, accounts for around 40 percent of Russia’s crude production.
It has targeted its cuts at its Tagul, Suzun and Vankor fields in the so-called Vankor cluster which is relatively new, among other sites, according to a source familiar with the matter who did not want to be identified.
The cuts did not touch mature units such as Yuganskneftegaz, Rosneft’s largest, the source said.
A company quarterly report in May showed that production fell at nearly all of Rosneft’s fields, both mature and newer, compared to the fourth quarter of 2016.
However, the source said that in the case of mature fields such as Yugansk, production was affected by unusually cold weather, not deliberate steps to lower output.
“As part of the (OPEC and non-OPEC) deal, Rosneft has cut its production at new projects, while the company’s strategy is aimed at development of mature fields,” Rosneft said in emailed comments to Reuters.
“This allows for boosting the efficiency of brownfields development, increase production at West Siberia fields and to raise greenfields’ output in the shortest time once the pricing environment improves.”
According to energy ministry data, which excludes some Rosneft units, the company’s average output in April was down by 116,000 bpd compared to October, the reference month for the deal.
Russia promised a total cut of 300,000 bpd.
Rosneft, which produced an average of 4.62 million bpd in January-March, saw output in the first quarter fall by 12.5 million barrels or 2.9 percent from the previous three months.
At other Russian oil companies, cuts in production have come primarily from mature fields, industry sources said.
But they said steps were being taken so that output could be ramped up as quickly as possible.
Mid-size oil company Russneft, whose shareholders include commodities trader Glencore <GLEN.L>, has mainly mature fields. It told Reuters in emailed comments that one or two months would be enough to get back to previous production levels.
A geologist working with a major Russian oil company, who did not want his name or the name of his employer published, said the output cuts were mainly done at high-rate wells where production could be restored in around a month.
Russian oil companies often drill high-rate wells at mature fields in a bid to maintain or, where possible, increase production.
“If it wasn’t for the restrictions (on global output), we would now not be at October levels… but higher,” a high-ranking oil industry executive said. “We have not just simply cut, we are losing the growth momentum.”
Russia ramped up its output to an all-time peak of 11.247 million bpd in October, with output for the month averaging 11.23 million bpd.
(Additional reporting by Oksana Kobzeva and Olesya Astakhova; editing by Katya Golubkova and Jason Neely)